2008-09-20
Palin, pancakes, and the straight talk express
Have the wheels come off the straight talk express? At least one sleeping giant woke up today: the NYT finally gives Sarah Palin a thorough vetting and the results aren't pretty. The McCain campaign's aggressive - and many say dishonest - tactics in promoting Palin may have sparked the beginnings of a media backlash. Camp McCain's reaction: We don't care and intend to stay on offense. And about that offense, they will soon have some help: Group With Swift Boat Alumni Readies Ads Attacking Obama. How low will things go? At this week's Values Voters Summit, 'Obama Waffles' with racial stereotypes were all the rage.
What's your secret tip for saving money at the grocery store?
What's your secret tip for saving money at the grocery store?
Even when we plan out meals for the week, the girlfriend and I always end up spending a lot more money than we'd like. We eat moderately healthy, love cooking, and pick easy to medium (in skill level required to make) dishes to prepare.
What's your trick for staying cheap and healthy at the grocery store? Looking for ideas beyond coupon clipping.
(Kind of like this question, only for food only (and not just websites!)
Even when we plan out meals for the week, the girlfriend and I always end up spending a lot more money than we'd like. We eat moderately healthy, love cooking, and pick easy to medium (in skill level required to make) dishes to prepare.
What's your trick for staying cheap and healthy at the grocery store? Looking for ideas beyond coupon clipping.
(Kind of like this question, only for food only (and not just websites!)
RIP, DFW
This, like many clichés, so lame and unexciting on the surface, actually expresses a great and terrible truth. It is not the least bit coincidental that adults who commit suicide with firearms almost always shoot themselves in: the head. They shoot the terrible master. And the truth is that most of these suicides are actually dead long before they pull the trigger. And I submit that this is what the real, no bullshit value of your liberal arts education is supposed to be about: how to keep from going through your comfortable, prosperous, respectable adult life dead, unconscious, a slave to your head and to your natural default setting of being uniquely, completely, imperially alone day in and day out. That may sound like hyperbole, or abstract nonsense. Let's get concrete. The plain fact is that you graduating seniors do not yet have any clue what "day in day out" really means. There happen to be whole, large parts of adult American life that nobody talks about in commencement speeches. One such part involves boredom, routine, and petty frustration. The parents and older folks here will know all too well what I'm talking about. First reported by an anonymous tip to a blog, the Los Angeles Times has confirmed that David Foster Wallace has hung himself.
2008-09-19
Paulson oversees historic government intervention
The man behind the Bush administration's sweeping intervention in the U.S. financial system is a former Goldman Sachs executive who came to Washington two years ago hoping to streamline regulation of the financial services sector.
It was Treasury Secretary Henry Paulson who pushed through the government bailout of struggling mortgage finance giants Fannie Mae (FNM) (FNM) and Freddie Mac (FRE) (FRE) two weeks ago. It was Paulson - working hand-in-hand with Federal Reserve Chairman Ben Bernanke - who decided to inject $85 billion of taxpayer money to prop up teetering insurance titan American International Group Inc. (AIG) (AIG) earlier this week. And now it is Paulson who is leading the push to craft a government rescue plan to relieve financial firms of billions of dollars in bad debt.
"Henry Paulson has done the most important thing, which is to keep the markets functioning and keep essential credit flowing," said Dean Baker, co-director of the Center for Economic and Policy Research.
Many market participants and observers say the Treasury Secretary has taken critical steps to head off a total meltdown in a financial system upended by a wave of defaults on subprime real estate loans packaged and resold by Wall Street. Still, Baker said, Paulson's long-term legacy will likely hinge on whether he is ultimately able to ensure "the parties responsible for this mess are not rewarded."
Hank Paulson, a graduate of Dartmouth College and Harvard Business School, arrived at the Treasury Department in the summer of 2006 following a long career at Goldman Sachs. An Illinois native, Paulson had started in Goldman's Chicago office in 1974 and rose through the ranks over 25 years to become chairman and CEO.
At Goldman, Paulson circled the globe in pursuit of international business deals and helped lead the firm's push into China. Those experiences solidified his support of free trade and open investment policies. Paulson, who is married with two grown children, is also a strong proponent of moving the U.S. beyond the petroleum age - for the sake of the economy and the environment. An avid birdwatcher, he is past chairman of The Peregrine Fund and The Nature Conservancy.
But it was the risk of financial turmoil that led White House Chief of Staff Joshua Bolten, himself a former Goldman executive, to aggressively recruit Paulson for the Treasury job. Paulson's Wall Street experience has been critical during the current crisis, many say.
It helped him team up with Bernanke and Timothy Geithner, president of the Federal Reserve Bank of New York, to help broker the Federal Reserve-backed purchase of troubled investment bank Bear Stearns by J.P. Morgan for $2 a share in March.
And it has helped him steer the Bush administration response to the earthquake that has shaken the credit markets and brought many of the most storied names on Wall Street to their knees in recent weeks.
In an administration that doesn't always listen to Democrats, Paulson has earned a reputation as a pragmatist and a deal maker. He worked closely with lawmakers from both parties to negotiate the $168 billion economic stimulus package that delivered rebate checks to taxpayers earlier this year. And he is in regular contact with congressional leaders now.
That's not to say that Paulson and the administration have not faced criticism, including questions about why the federal government is stepping in to save financial institutions that made bad bets on subprime loans when so many Americans are losing their homes.
What's more, the irony of a Republican administration overseeing such historic market intervention is not lost on anyone. But in an interview with The Associated Press in April, Paulson stressed that after all the Wall Street excesses he has witnessed over the years, he sees an important role for regulation.
"You can't have the experience I've had in markets and be against regulation," he said. "I believe in markets. I believe you cannot have competitive and efficient markets unless you have strong investor protection and a healthy regard for systemic stability."
And in the current environment, Paulson may feel that he has no choice but to intervene.
"If you believe the government should just stay out and let the chips fall where they may," this is 180 degrees at odds with that," said Baker, of the Center for Economic and Policy Research. "But when you're standing there as Treasury secretary watching the financial markets melt down before your eyes, it's hard to just stand there and do nothing."
It was Treasury Secretary Henry Paulson who pushed through the government bailout of struggling mortgage finance giants Fannie Mae (FNM) (FNM) and Freddie Mac (FRE) (FRE) two weeks ago. It was Paulson - working hand-in-hand with Federal Reserve Chairman Ben Bernanke - who decided to inject $85 billion of taxpayer money to prop up teetering insurance titan American International Group Inc. (AIG) (AIG) earlier this week. And now it is Paulson who is leading the push to craft a government rescue plan to relieve financial firms of billions of dollars in bad debt.
"Henry Paulson has done the most important thing, which is to keep the markets functioning and keep essential credit flowing," said Dean Baker, co-director of the Center for Economic and Policy Research.
Many market participants and observers say the Treasury Secretary has taken critical steps to head off a total meltdown in a financial system upended by a wave of defaults on subprime real estate loans packaged and resold by Wall Street. Still, Baker said, Paulson's long-term legacy will likely hinge on whether he is ultimately able to ensure "the parties responsible for this mess are not rewarded."
Hank Paulson, a graduate of Dartmouth College and Harvard Business School, arrived at the Treasury Department in the summer of 2006 following a long career at Goldman Sachs. An Illinois native, Paulson had started in Goldman's Chicago office in 1974 and rose through the ranks over 25 years to become chairman and CEO.
At Goldman, Paulson circled the globe in pursuit of international business deals and helped lead the firm's push into China. Those experiences solidified his support of free trade and open investment policies. Paulson, who is married with two grown children, is also a strong proponent of moving the U.S. beyond the petroleum age - for the sake of the economy and the environment. An avid birdwatcher, he is past chairman of The Peregrine Fund and The Nature Conservancy.
But it was the risk of financial turmoil that led White House Chief of Staff Joshua Bolten, himself a former Goldman executive, to aggressively recruit Paulson for the Treasury job. Paulson's Wall Street experience has been critical during the current crisis, many say.
It helped him team up with Bernanke and Timothy Geithner, president of the Federal Reserve Bank of New York, to help broker the Federal Reserve-backed purchase of troubled investment bank Bear Stearns by J.P. Morgan for $2 a share in March.
And it has helped him steer the Bush administration response to the earthquake that has shaken the credit markets and brought many of the most storied names on Wall Street to their knees in recent weeks.
In an administration that doesn't always listen to Democrats, Paulson has earned a reputation as a pragmatist and a deal maker. He worked closely with lawmakers from both parties to negotiate the $168 billion economic stimulus package that delivered rebate checks to taxpayers earlier this year. And he is in regular contact with congressional leaders now.
That's not to say that Paulson and the administration have not faced criticism, including questions about why the federal government is stepping in to save financial institutions that made bad bets on subprime loans when so many Americans are losing their homes.
What's more, the irony of a Republican administration overseeing such historic market intervention is not lost on anyone. But in an interview with The Associated Press in April, Paulson stressed that after all the Wall Street excesses he has witnessed over the years, he sees an important role for regulation.
"You can't have the experience I've had in markets and be against regulation," he said. "I believe in markets. I believe you cannot have competitive and efficient markets unless you have strong investor protection and a healthy regard for systemic stability."
And in the current environment, Paulson may feel that he has no choice but to intervene.
"If you believe the government should just stay out and let the chips fall where they may," this is 180 degrees at odds with that," said Baker, of the Center for Economic and Policy Research. "But when you're standing there as Treasury secretary watching the financial markets melt down before your eyes, it's hard to just stand there and do nothing."
Oil jumps above $104 a barrel on US bailout plan
Oil prices shot up more than $6 a barrel Friday, breaking back into $100 territory as a sweeping government plan to rescue the imperiled U.S. financial system emboldened investors to re-enter the markets.
Light, sweet crude for October delivery rose $6.67 to settle at $104.55 a barrel on the New York Mercantile Exchange, after earlier rising as high as $105.25. It was oil's first close above $100 in a week.
Crude has climbed over $13 in the past three days as the government carries out a historic intervention into the financial system. But analysts say prices could resume their downward trend, noting that demand for energy will likely remain weak as a slumping economy leads Americans to drive less and businesses to scale back operations.
On Friday, Treasury Secretary Henry Paulson said the rescue plan was aimed at removing billions of dollars of troubled assets from the books of banking institutions and restoring calm to panicky financial markets after a week of intense volatility. The Securities and Exchange Commission also temporarily banned short-selling - or betting that a stock will fall - of about 800 financial firms, hoping to stem heavy losses in that sector.
(AP) Graphic shows the price of crude oil;
Full Image
The moves soothed skittish traders and sent stocks surging on Wall Street, giving a boost to energy and other commodities. Crude jumped nearly $5 in morning trading, gave back most of the gains later in the day and then climbed again toward the end of regular trading.
"The government rescue plan has reduced the likelihood of a financial meltdown, so the theme of energy demand deterioration is being pushed to the back burner for the time being," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.
But he and other analysts pointed out that oil's fundamentals remain largely bearish.
Crude prices have fallen about $43 since reaching a record $147.27 a barrel on July 11 on concern that slowing economic growth in developed countries will undermine crude demand.
Those fears deepened this week as turmoil in the U.S. financial system led to the bankruptcy of investment bank Lehman Brothers Holding Inc. and an $85 billion government rescue of insurer American International Group Inc. (AIG)
"People realize we still have a weak economy and $100 oil in these conditions is still very expensive," said Stephen Schork, an analyst and oil trader in Villanova, Pa. "I'm not a believer that the ship has been turned around and that we're going back toward $150 oil."
Meanwhile at the pump, gas prices eased slightly as more Gulf Coast refineries came back on line following the passage of Hurricane Ike last weekend. A gallon of regular fell less than half a penny to a new national average of $3.807, according to auto club AAA, the Oil Price Information Service and Wright Express.
Nigeria's main militant group said Thursday it bombed another oil pipeline, marking a sixth straight day of stepped-up violence in Africa's oil giant.
The Movement for the Emancipation of the Niger Delta said in a statement it used high explosives to destroy the conduit run by a unit of Royal Dutch Shell PLC. (RDSB)
Shell officials could not immediately be reached for comment.
The militants have declared an "oil war" in the Niger Delta, where militants demanding more oil-industry funds from the federal government have increased attacks. About 40 percent of Nigeria's normal daily oil production is now off-line, severely curtailing exports.
Still, oil traders seemed to largely ignore the violence, repeating a trend of recent weeks in which normally bullish news fails to rally the market.
"The focus of the market right now has switched from supply to demand," said Mark Pervan, senior commodity strategist with ANZ Bank in Melbourne. "So these stories will have some impact, but not as much as they had during the last six months when the market was supply-driven."
In other Nymex trading, heating oil futures rose 11.54 cents to settle at $2.8978 a gallon, while gasoline prices gained 11.73 cents to settle at $2.5997 a gallon. Natural gas for October delivery fell 7.8 cents to settle at $7.848 per 1,000 cubic feet.
In London, November Brent crude rose $4.42 to settle at $99.61 a barrel on the ICE Futures exchange.
Light, sweet crude for October delivery rose $6.67 to settle at $104.55 a barrel on the New York Mercantile Exchange, after earlier rising as high as $105.25. It was oil's first close above $100 in a week.
Crude has climbed over $13 in the past three days as the government carries out a historic intervention into the financial system. But analysts say prices could resume their downward trend, noting that demand for energy will likely remain weak as a slumping economy leads Americans to drive less and businesses to scale back operations.
On Friday, Treasury Secretary Henry Paulson said the rescue plan was aimed at removing billions of dollars of troubled assets from the books of banking institutions and restoring calm to panicky financial markets after a week of intense volatility. The Securities and Exchange Commission also temporarily banned short-selling - or betting that a stock will fall - of about 800 financial firms, hoping to stem heavy losses in that sector.
(AP) Graphic shows the price of crude oil;
Full Image
The moves soothed skittish traders and sent stocks surging on Wall Street, giving a boost to energy and other commodities. Crude jumped nearly $5 in morning trading, gave back most of the gains later in the day and then climbed again toward the end of regular trading.
"The government rescue plan has reduced the likelihood of a financial meltdown, so the theme of energy demand deterioration is being pushed to the back burner for the time being," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.
But he and other analysts pointed out that oil's fundamentals remain largely bearish.
Crude prices have fallen about $43 since reaching a record $147.27 a barrel on July 11 on concern that slowing economic growth in developed countries will undermine crude demand.
Those fears deepened this week as turmoil in the U.S. financial system led to the bankruptcy of investment bank Lehman Brothers Holding Inc. and an $85 billion government rescue of insurer American International Group Inc. (AIG)
"People realize we still have a weak economy and $100 oil in these conditions is still very expensive," said Stephen Schork, an analyst and oil trader in Villanova, Pa. "I'm not a believer that the ship has been turned around and that we're going back toward $150 oil."
Meanwhile at the pump, gas prices eased slightly as more Gulf Coast refineries came back on line following the passage of Hurricane Ike last weekend. A gallon of regular fell less than half a penny to a new national average of $3.807, according to auto club AAA, the Oil Price Information Service and Wright Express.
Nigeria's main militant group said Thursday it bombed another oil pipeline, marking a sixth straight day of stepped-up violence in Africa's oil giant.
The Movement for the Emancipation of the Niger Delta said in a statement it used high explosives to destroy the conduit run by a unit of Royal Dutch Shell PLC. (RDSB)
Shell officials could not immediately be reached for comment.
The militants have declared an "oil war" in the Niger Delta, where militants demanding more oil-industry funds from the federal government have increased attacks. About 40 percent of Nigeria's normal daily oil production is now off-line, severely curtailing exports.
Still, oil traders seemed to largely ignore the violence, repeating a trend of recent weeks in which normally bullish news fails to rally the market.
"The focus of the market right now has switched from supply to demand," said Mark Pervan, senior commodity strategist with ANZ Bank in Melbourne. "So these stories will have some impact, but not as much as they had during the last six months when the market was supply-driven."
In other Nymex trading, heating oil futures rose 11.54 cents to settle at $2.8978 a gallon, while gasoline prices gained 11.73 cents to settle at $2.5997 a gallon. Natural gas for October delivery fell 7.8 cents to settle at $7.848 per 1,000 cubic feet.
In London, November Brent crude rose $4.42 to settle at $99.61 a barrel on the ICE Futures exchange.
Govt trading ban could have unintended results
The government's unprecedented move Friday to ban people from betting against financial stocks might be a salve for the market's turmoil but could also carry serious unintended consequences.
In a bid to shore up investor confidence in the face of the spiraling market crisis, the Securities and Exchange Commission temporarily banned all short-selling in the shares of 799 financial companies. Short selling is a time-honored method for profiting when a stock drops.
The ban took effect immediately Friday and extends through Oct. 2. The SEC said it might extend the ban - so that it would last for as many as 30 calendar days in total - if it deems that necessary.
That window could be enough time to calm the roiling financial markets, with the Bush administration's massive new programs to buy up Wall Street's toxic debt possibly starting to have a salutary effect by then.
The short-selling ban is "kind of a time-out," said John Coffee, a professor of securities law at Columbia University. "In a time of crisis, the dangers of doing too little are far greater than the dangers of doing too much."
But on Wall Street, professional short-sellers said they were being unfairly targeted by the SEC's prohibition. And some analysts warned of possible negative consequences, maintaining that banning short-selling could actually distort - not stabilize - edgy markets.
Indeed, hours after the new ban was announced, some of its details appeared to be a work in progress. The SEC said its staff was recommending exemptions from the ban for trades market professionals make to hedge their investments in stock options or futures.
"I don't think it's going to accomplish what they're after," said Jeff Tjornehoj, senior analyst at fund research firm Lipper Inc. Without short sellers, he said, investors will have a harder time gauging the true value of a stock.
"Most people want to be in a stock for the long run and want to see prices go up. Short sellers are useful for throwing water in their face and saying, 'Oh yeah? Think about this,'" Tjornehoj said. As a result, restricting the practice could inflate the value of some stocks, opening the door for a big downward correction later.
"Without offering a flip-side to the price-discovery mechanism, I think there's a pressure built up in stock prices that only gets relieved in a great cataclysm," he said.
Short selling involves borrowing a company's shares, selling them, and then buying them to return them to the lender later, when the stock falls. The short-seller pockets the difference in price.
Although the practice can make markets more efficient and bring in more capital, the government argues that it has widened the scope of the recent financial crisis and contributed to the collapsing values of investment and commercial bank stocks in particular.
Government officials on both sides of the Atlantic have been denouncing hedge funds and other short sellers they say have swarmed over the limp bodies of venerable investment banks and other big companies. New York Attorney General Andrew Cuomo likened them to "looters after a hurricane," and his office is investigating a possible conspiracy among short-sellers to spread negative rumors to pound down companies' stock prices.
The turmoil in recent weeks has swallowed some of the most storied names on Wall Street. Three of its five major investment banks - Bear Stearns, Lehman Brothers and Merrill Lynch - have either gone out of business or been driven into the arms of another bank. Many contend that short-selling played a key role in forcing the collapse of these institutions.
SEC Chairman Christopher Cox, who with Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke had met with lawmakers at the Capitol Thursday night, acknowledged that such extraordinary measures would not be necessary in a well-functioning market and said they are only temporary.
Cox said Friday his agency "is committed to using every weapon in its arsenal to combat market manipulation that threatens investors and capital markets." He said the temporary ban "will restore equilibrium to markets."
The SEC also imposed a new requirement, also temporary, for investment managers to publicly report their new short sales of stocks. And the agency eased restrictions on the ability of companies to buy back their own shares, also through Oct. 2, another move aimed at helping restore liquidity to the distressed and volatile market.
Over the summer, the SEC imposed a 30-day emergency ban on "naked" short selling - where sellers don't actually borrow the shares they sell - in the stocks of mortgage finance giants Fannie Mae (FNM) and Freddie Mac (FRE) and 17 large investment banks. But Friday's ban expanded to all short selling, not just the more aggressive naked variety, and to a much wider universe of companies.
The 799 companies covered by the SEC ban are an A-to-Z of the nation's financial institutions, including the powerhouse investment banks such as Goldman Sachs Group Inc. (GS) and Morgan Stanley (MS) and commercial banks running the gamut from Bank of America Corp. (BAC) to Cape Fear Bank Corp. (CAPE) SLM Corp. (SLM), which is known as Sallie Mae and is the biggest U.S. student lender is on the list, as are Charles Schwab Corp. (SCHW), Berkshire Hathaway Inc. (BRKA) and Principal Financial Group Inc. (PFG)
Washington Mutual Inc., the nation's largest thrift, which has lost billions from subprime mortgage exposure and seen its shares plunge in recent weeks, also is on the SEC list. So is the NYSE Euronext, the biggest stock exchange, and foreign financial companies whose stock is traded on U.S. exchanges, such as Lloyds TSB Group PLC of Britain and China Life Insurance Co. Ltd.
However, investors still have ways to place bearish bets: by trading in options that turn profitable when a stock drops.
Jim Chanos, a prominent short seller and president of a $7 billion hedge fund, Kynikos Associates, called short-selling a "vital investment strategy" and said banning the practice "will not enhance long-term market integrity."
He argued that investment banks' bad bets on risky assets - not predatory short-sellers - were the true cause of the steep declines in the stock price of financial firms.
"Far from being the cause of the crisis, many short sellers were warning months and years ago about problems in this area," Chanos said in a statement.
The new SEC ban also touched smaller investors. Two popular funds that specialize in short selling and are traded on stock exchanges - ProShares' Short Financials and UltraShort Financials - were temporarily halted Friday due to the ban. Trading resumed later in the day, but ProShares said it has suspended creating new shares in the funds until further notice.
ProShares Chairman Michael Sapir called the ban "extraordinary" and said it remains to be seen whether it has the intended effect of calming the markets.
"I don't think anyone sees the action today as a long-term solution," Sapir said. "It's a way to calm things down, but it isn't consistent with a free and open market."
The SEC's ban came in concert with Britain's Financial Services Authority, which announced a similar ban there Thursday. Some British politicians had claimed that short-selling was partly responsible for HBOS PLC's abrupt takeover by banking rival Lloyds TSB PLC on Thursday. The ban there was met with a similar reaction as the SEC move - a mix of relief and skepticism.
"Banning short selling is just a part of a solution," said Nic Clarke, banking analyst at Charles Stanley Stockbrokers. "We view this as a side issue. It doesn't stop the underlying reason for the credit crunch and it doesn't get to the heart of the problem."
In a bid to shore up investor confidence in the face of the spiraling market crisis, the Securities and Exchange Commission temporarily banned all short-selling in the shares of 799 financial companies. Short selling is a time-honored method for profiting when a stock drops.
The ban took effect immediately Friday and extends through Oct. 2. The SEC said it might extend the ban - so that it would last for as many as 30 calendar days in total - if it deems that necessary.
That window could be enough time to calm the roiling financial markets, with the Bush administration's massive new programs to buy up Wall Street's toxic debt possibly starting to have a salutary effect by then.
The short-selling ban is "kind of a time-out," said John Coffee, a professor of securities law at Columbia University. "In a time of crisis, the dangers of doing too little are far greater than the dangers of doing too much."
But on Wall Street, professional short-sellers said they were being unfairly targeted by the SEC's prohibition. And some analysts warned of possible negative consequences, maintaining that banning short-selling could actually distort - not stabilize - edgy markets.
Indeed, hours after the new ban was announced, some of its details appeared to be a work in progress. The SEC said its staff was recommending exemptions from the ban for trades market professionals make to hedge their investments in stock options or futures.
"I don't think it's going to accomplish what they're after," said Jeff Tjornehoj, senior analyst at fund research firm Lipper Inc. Without short sellers, he said, investors will have a harder time gauging the true value of a stock.
"Most people want to be in a stock for the long run and want to see prices go up. Short sellers are useful for throwing water in their face and saying, 'Oh yeah? Think about this,'" Tjornehoj said. As a result, restricting the practice could inflate the value of some stocks, opening the door for a big downward correction later.
"Without offering a flip-side to the price-discovery mechanism, I think there's a pressure built up in stock prices that only gets relieved in a great cataclysm," he said.
Short selling involves borrowing a company's shares, selling them, and then buying them to return them to the lender later, when the stock falls. The short-seller pockets the difference in price.
Although the practice can make markets more efficient and bring in more capital, the government argues that it has widened the scope of the recent financial crisis and contributed to the collapsing values of investment and commercial bank stocks in particular.
Government officials on both sides of the Atlantic have been denouncing hedge funds and other short sellers they say have swarmed over the limp bodies of venerable investment banks and other big companies. New York Attorney General Andrew Cuomo likened them to "looters after a hurricane," and his office is investigating a possible conspiracy among short-sellers to spread negative rumors to pound down companies' stock prices.
The turmoil in recent weeks has swallowed some of the most storied names on Wall Street. Three of its five major investment banks - Bear Stearns, Lehman Brothers and Merrill Lynch - have either gone out of business or been driven into the arms of another bank. Many contend that short-selling played a key role in forcing the collapse of these institutions.
SEC Chairman Christopher Cox, who with Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke had met with lawmakers at the Capitol Thursday night, acknowledged that such extraordinary measures would not be necessary in a well-functioning market and said they are only temporary.
Cox said Friday his agency "is committed to using every weapon in its arsenal to combat market manipulation that threatens investors and capital markets." He said the temporary ban "will restore equilibrium to markets."
The SEC also imposed a new requirement, also temporary, for investment managers to publicly report their new short sales of stocks. And the agency eased restrictions on the ability of companies to buy back their own shares, also through Oct. 2, another move aimed at helping restore liquidity to the distressed and volatile market.
Over the summer, the SEC imposed a 30-day emergency ban on "naked" short selling - where sellers don't actually borrow the shares they sell - in the stocks of mortgage finance giants Fannie Mae (FNM) and Freddie Mac (FRE) and 17 large investment banks. But Friday's ban expanded to all short selling, not just the more aggressive naked variety, and to a much wider universe of companies.
The 799 companies covered by the SEC ban are an A-to-Z of the nation's financial institutions, including the powerhouse investment banks such as Goldman Sachs Group Inc. (GS) and Morgan Stanley (MS) and commercial banks running the gamut from Bank of America Corp. (BAC) to Cape Fear Bank Corp. (CAPE) SLM Corp. (SLM), which is known as Sallie Mae and is the biggest U.S. student lender is on the list, as are Charles Schwab Corp. (SCHW), Berkshire Hathaway Inc. (BRKA) and Principal Financial Group Inc. (PFG)
Washington Mutual Inc., the nation's largest thrift, which has lost billions from subprime mortgage exposure and seen its shares plunge in recent weeks, also is on the SEC list. So is the NYSE Euronext, the biggest stock exchange, and foreign financial companies whose stock is traded on U.S. exchanges, such as Lloyds TSB Group PLC of Britain and China Life Insurance Co. Ltd.
However, investors still have ways to place bearish bets: by trading in options that turn profitable when a stock drops.
Jim Chanos, a prominent short seller and president of a $7 billion hedge fund, Kynikos Associates, called short-selling a "vital investment strategy" and said banning the practice "will not enhance long-term market integrity."
He argued that investment banks' bad bets on risky assets - not predatory short-sellers - were the true cause of the steep declines in the stock price of financial firms.
"Far from being the cause of the crisis, many short sellers were warning months and years ago about problems in this area," Chanos said in a statement.
The new SEC ban also touched smaller investors. Two popular funds that specialize in short selling and are traded on stock exchanges - ProShares' Short Financials and UltraShort Financials - were temporarily halted Friday due to the ban. Trading resumed later in the day, but ProShares said it has suspended creating new shares in the funds until further notice.
ProShares Chairman Michael Sapir called the ban "extraordinary" and said it remains to be seen whether it has the intended effect of calming the markets.
"I don't think anyone sees the action today as a long-term solution," Sapir said. "It's a way to calm things down, but it isn't consistent with a free and open market."
The SEC's ban came in concert with Britain's Financial Services Authority, which announced a similar ban there Thursday. Some British politicians had claimed that short-selling was partly responsible for HBOS PLC's abrupt takeover by banking rival Lloyds TSB PLC on Thursday. The ban there was met with a similar reaction as the SEC move - a mix of relief and skepticism.
"Banning short selling is just a part of a solution," said Nic Clarke, banking analyst at Charles Stanley Stockbrokers. "We view this as a side issue. It doesn't stop the underlying reason for the credit crunch and it doesn't get to the heart of the problem."
A tumultuous week ends with Wall Street remade
One of the most tumultuous weeks in the 216-year history of Wall Street closed with a dramatic two-day rally as investors celebrated an unprecedented government plan to cleanse banks of the bad mortgages that touched off a crisis in world finance.
The details of the rescue - not to mention how many hundreds of billions of dollars it will cost - remained a mystery, but investors snapped up stocks anyway in hopes the end of the credit crisis was near.
The Dow Jones industrials shot up about 370 points, giving them a two-day gain of about 780. The week also included a drop of more than 500 points on Monday and nearly 450 points on Wednesday.
You would never have known it from the anxiety that gripped Wall Street and Washington, not to mention dinner tables across the nation, but stocks ended the week virtually unchanged, with the Dow Jones industrial average down 33.55 points for the week, or 0.3 percent. The Dow stood at 11,388.44 after Friday's trading, up more than 3 percent for the day.
As the closing bell sounded at the New York Stock Exchange, traders could finally pause and reflect on a week of operatic reversals of fortune and federal intervention that remade Wall Street itself.
Among the highlights: The Treasury extended an $85 billion loan to insurer American International Group. The government prepared to take over untold billions in toxic mortgage assets and placed a $50 billion safety net under money market funds. Regulators banned some short-selling. Of the five major U.S. investment houses in existence at the start of the year, two remained intact and independent.
"This was like trying to put a wildfire out," said David Resler, chief economist at Nomura Securities.
On Friday, bond prices tumbled after investors rushed back into stocks from the relative safety of Treasury securities. The increase in the yields of bellwether two-year bonds meant investors think the economy is fundamentally stronger than it seemed Monday and they don't see a rate cut soon.
Still, some were skeptical of the government intervention.
"This is the biggest travesty the federal government has ever gotten involved with," said Jay Brew, chief bank strategist at M. Rae Resources Inc. "This is just going to lead to a much deeper and prolonged recession."
It wasn't clear how much the latest rescue would cost. Speaking to reporters, Treasury Secretary Henry Paulson said the proposed relief program for troubled mortgage assets must be large enough to have an impact while protecting taxpayers as much as possible.
"I am convinced that this bold approach will cost American families far less than the alternative - a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion," Paulson said.
Some people scratched their heads and questioned why Wall Street was being bailed out for risky bets it had earlier made profits on.
John Santisteban of Atlanta, a 58-year-old salesman for a security system company, said the government should ask for something in return from financial executives. "All their bonuses should have to be given back as part of the bailout package," he said.
President Bush, speaking from the White House Rose Garden, said: "America's economy is facing unprecedented challenges. We're responding with unprecedented measures." Leaders from the Fed and Treasury planned to meet with congressional leaders over the weekend.
It was an extraordinary week in Washington and New York. Lehman Brothers declared bankruptcy and spooked Merrill Lynch, which fled into the arms of Bank of America Corp. (BAC) in a planned all-stock deal valued at roughly $55 billion based on Friday's stock prices.
Financial stocks were pummeled early in the week, but the sector turned around after Securities and Exchange Commission Chairman Christopher Cox announced a ban on some short-selling, one method of betting a stock will fall. The financial stocks in the Standard & Poor's 500 ended Friday's trading up 10 percent and managed a gain for the week.
The broader stock market clawed back earlier losses as it capped the week with a two-day rally, the largest since 2000. Gold prices, which had soared earlier in the week as investors sought a safe place to park their money, tumbled Friday, as did bonds. Money market funds, whose fragility earlier in the week was one catalyst for government intervention, appeared to stabilize.
The tumult began with a meeting last Friday night of Wall Street CEOs at the New York Federal Reserve. When they were unable to come up with a plan to rescue Lehman, traders were called in for an emergency session Sunday. Some were back at work at 3 a.m. Monday to follow the action in London. With news of Lehman's filing and Merrill's hasty deal to be bought by Bank of America Corp., stocks plunged. Investors saw their biggest one-day losses since the 2001 terrorist attacks.
Worse would come as panic infected money market funds. Credit markets froze after the Reserve Primary Fund, the nation's oldest money-market fund, said it was no longer able to assure clients it had the assets to back every dollar they had invested. It was the first time since 1994 that a money-market fund had seen its assets fall below its investments.
The announcement sparked panic. Investors rushed to withdraw their money from money market funds, and lending tightened worldwide. The interest for some overnight loans tripled, as banks hoarded cash. Lehman Brothers Holdings Inc. (LEH) (LEH), which filed for bankruptcy protection Monday, had sold off its North American operations to British purchaser Barclays PLC (BCS) by Tuesday.
As losses piled up, Resler said Wednesday: "There's good reason to believe, very good reason, maybe as good as you'll ever see, that later we'll look back on today and say if you had bought at these prices, you paid a good price. Maybe not tomorrow or next month, but with the fullness of time, you'll look back at the prices you paid today and say you got a good purchase."
For two days, at least, he was right.
The details of the rescue - not to mention how many hundreds of billions of dollars it will cost - remained a mystery, but investors snapped up stocks anyway in hopes the end of the credit crisis was near.
The Dow Jones industrials shot up about 370 points, giving them a two-day gain of about 780. The week also included a drop of more than 500 points on Monday and nearly 450 points on Wednesday.
You would never have known it from the anxiety that gripped Wall Street and Washington, not to mention dinner tables across the nation, but stocks ended the week virtually unchanged, with the Dow Jones industrial average down 33.55 points for the week, or 0.3 percent. The Dow stood at 11,388.44 after Friday's trading, up more than 3 percent for the day.
As the closing bell sounded at the New York Stock Exchange, traders could finally pause and reflect on a week of operatic reversals of fortune and federal intervention that remade Wall Street itself.
Among the highlights: The Treasury extended an $85 billion loan to insurer American International Group. The government prepared to take over untold billions in toxic mortgage assets and placed a $50 billion safety net under money market funds. Regulators banned some short-selling. Of the five major U.S. investment houses in existence at the start of the year, two remained intact and independent.
"This was like trying to put a wildfire out," said David Resler, chief economist at Nomura Securities.
On Friday, bond prices tumbled after investors rushed back into stocks from the relative safety of Treasury securities. The increase in the yields of bellwether two-year bonds meant investors think the economy is fundamentally stronger than it seemed Monday and they don't see a rate cut soon.
Still, some were skeptical of the government intervention.
"This is the biggest travesty the federal government has ever gotten involved with," said Jay Brew, chief bank strategist at M. Rae Resources Inc. "This is just going to lead to a much deeper and prolonged recession."
It wasn't clear how much the latest rescue would cost. Speaking to reporters, Treasury Secretary Henry Paulson said the proposed relief program for troubled mortgage assets must be large enough to have an impact while protecting taxpayers as much as possible.
"I am convinced that this bold approach will cost American families far less than the alternative - a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion," Paulson said.
Some people scratched their heads and questioned why Wall Street was being bailed out for risky bets it had earlier made profits on.
John Santisteban of Atlanta, a 58-year-old salesman for a security system company, said the government should ask for something in return from financial executives. "All their bonuses should have to be given back as part of the bailout package," he said.
President Bush, speaking from the White House Rose Garden, said: "America's economy is facing unprecedented challenges. We're responding with unprecedented measures." Leaders from the Fed and Treasury planned to meet with congressional leaders over the weekend.
It was an extraordinary week in Washington and New York. Lehman Brothers declared bankruptcy and spooked Merrill Lynch, which fled into the arms of Bank of America Corp. (BAC) in a planned all-stock deal valued at roughly $55 billion based on Friday's stock prices.
Financial stocks were pummeled early in the week, but the sector turned around after Securities and Exchange Commission Chairman Christopher Cox announced a ban on some short-selling, one method of betting a stock will fall. The financial stocks in the Standard & Poor's 500 ended Friday's trading up 10 percent and managed a gain for the week.
The broader stock market clawed back earlier losses as it capped the week with a two-day rally, the largest since 2000. Gold prices, which had soared earlier in the week as investors sought a safe place to park their money, tumbled Friday, as did bonds. Money market funds, whose fragility earlier in the week was one catalyst for government intervention, appeared to stabilize.
The tumult began with a meeting last Friday night of Wall Street CEOs at the New York Federal Reserve. When they were unable to come up with a plan to rescue Lehman, traders were called in for an emergency session Sunday. Some were back at work at 3 a.m. Monday to follow the action in London. With news of Lehman's filing and Merrill's hasty deal to be bought by Bank of America Corp., stocks plunged. Investors saw their biggest one-day losses since the 2001 terrorist attacks.
Worse would come as panic infected money market funds. Credit markets froze after the Reserve Primary Fund, the nation's oldest money-market fund, said it was no longer able to assure clients it had the assets to back every dollar they had invested. It was the first time since 1994 that a money-market fund had seen its assets fall below its investments.
The announcement sparked panic. Investors rushed to withdraw their money from money market funds, and lending tightened worldwide. The interest for some overnight loans tripled, as banks hoarded cash. Lehman Brothers Holdings Inc. (LEH) (LEH), which filed for bankruptcy protection Monday, had sold off its North American operations to British purchaser Barclays PLC (BCS) by Tuesday.
As losses piled up, Resler said Wednesday: "There's good reason to believe, very good reason, maybe as good as you'll ever see, that later we'll look back on today and say if you had bought at these prices, you paid a good price. Maybe not tomorrow or next month, but with the fullness of time, you'll look back at the prices you paid today and say you got a good purchase."
For two days, at least, he was right.
Radical rescue: Hundreds of billions for bailout
Struggling to stave off financial catastrophe, the Bush administration on Friday laid out a radical bailout plan with a jawdropping price tag - a takeover of a half-trillion dollars or more in worthless mortgages and other bad debt held by tottering institutions.
Relieved investors sent stocks soaring on Wall Street and around the globe. The Dow-Jones industrials average rose 368 points after surging 410 points the day before on rumors the federal action was afoot.
A grim-faced President Bush acknowledged risks to taxpayers in what would be the most sweeping government intervention to rescue failing financial institutions since the Great Depression. But he declared, "The risk of not acting would be far higher."
The administration is asking Congress for far-reaching new powers to take over troubled mortgages from banks and other companies, including purchasing sour mortgage-backed securities. Administration officials and congressional leaders are to work out details over the weekend.
(AP) President Bush walks with Federal Reserve Board Chairman Ben Bernanke, out of the Oval Office of...
Full Image
Congressional officials said they expected a request for legal authority to buy up the bad loans, at a cost in excess of $500 billion to the government. Democrats were discussing whether to try to attach middle class assistance to the legislation, despite a request from Bush to avoid adding controversial items that could delay action. An expansion of jobless benefits was one possibility.
In other major steps, the Treasury Department and Federal Reserve moved to give money-market mutual funds the same kind of federal protection, at least temporarily, that now applies to savings and checking accounts and certificates of deposit at banks. Money-market accounts sold through retail banks are already FDIC insured.
The spreading global selling panic had started to threaten some money-market funds, usually thought of as rock-solid investments. Administration officials feared a run on these funds, held by millions of Americans.
"Every American should know that the federal government continues to enforce laws and regulations protecting your money," Bush said at the White House. The 75-year-old Federal Deposit Insurance Corporation now insures savings and checking accounts and certificates of deposit up to $100,000.
Separately, the Securities and Exchange Commission acted to block short-selling in financial securities. That is a trading method that bets the value of stocks will go down. It has been blamed for accelerating the plunge in stock prices of banks and other financial institutions.
(AP) President Bush, second from left, accompanied by, from left, Federal Reserve Chairman Ben Bernanke,...
Full Image
"This is a pivotal moment for America's economy," Bush said. "In our nation's history, there have been moments that require us to come together across party lines to address major challenges. This is such a moment."
Congressional leaders of both parties welcomed the administration's bold moves, after a series of ad hoc rescues.
The talk on the presidential campaign trail, barely six weeks before the election, was of bipartisanship, too.
Democrat Barack Obama said it was critical that leaders in both parties work in concert. "Truly, we are all in this together," he said.
GOP presidential nominee John McCain said leaders should put aside partisan differences and "any action should be designed to keep people in their homes and safeguard the life savings of all Americans."
(AP) Treasury Secretary Henry Paulson briefs reporters about efforts to heal the crisis in the U.S....
Full Image
The federal government already has pledged more than $600 billion in the past year to bail out, or help bail out, some of the biggest names in American finance. That includes the rescue of investment bank Bear Stearns in March, the takeover of mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE) earlier this month and the takeover of the world's largest insurance company, American International Group, just this week.
But the contagion continued to spread, bringing political consensus that drastic and comprehensive federal action was needed.
There are precedents for such a federal takeover.
In the late 1980s, the government created the Resolution Trust Corporation to tackle the savings and loan crisis. It acquired the defaulted mortgages, foreclosed real estate and other assets of nearly a thousand failed S&Ls, restoring order and stability to the system. Resolving that crisis took six years and $125 billion in taxpayer money - roughly equal to $200 billion in today's dollars.
And there was the Reconstruction Finance Corporation, a Depression-era relief program formed in 1932 by President Hoover that tried to revive the market by giving loans to banks and other businesses.
(AP) Treasury Secretary Henry Paulson briefs reporters about efforts to heal the crisis in the U.S....
Full Image
On Friday, Treasury Secretary Henry Paulson gave few details about the structure of the new program. Asked about an overall price tag, he said, "hundreds of billions" of dollars.
Congressional leaders said they were ready to move quickly but still needed details of the administration plan. For instance, there was no indication of what the government would get in return from financial companies for the federal assistance.
Paulson and Federal Reserve Chairman Ben Bernanke briefed lawmakers in both parties on the idea by conference call Friday.
In a session with House Democrats, they described a plan where the government would in essence set up reverse auctions, putting up money for a class of distressed assets - such as loans that are delinquent but not in default - and financial institutions would compete for how little they would accept for the investments, said Rep. Brad Sherman, D-Calif., who participated in the call.
"You give them good cash; they give you the worst of the worst," Sherman said of the plan, which he complained that Bush and his economic advisers were trying to panic lawmakers into rubber-stamping.
(AP) Graphic shows timeline of credit crisis events with banking and mortgage foreclosures data;
Full Image
Paulson rejected Democrats' calls to include tighter regulations, corporate reforms or limits on executive compensation as part of the measure, Sherman said. "He's doing his best to paint a picture of the sky falling, and then he says, because the sky's falling, you have to do it my way."
Paulson said the new troubled-asset relief program that he wants Congress to enact must be large enough to have the necessary impact while protecting taxpayers as much as possible.
"I am convinced that this bold approach will cost American families far less than the alternative - a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion," Paulson. "The financial security of all Americans ... depends on our ability to restore our financial institutions to a sound footing."
Bush said simply, "We must act now."
"America's economy is facing unprecedented challenges. We're responding with unprecedented measures," Bush declared, standing in the White House Rose Garden with Paulson, Bernanke and Christopher Cox, chairman of the Securities and Exchange Commission.
Shortly after his remarks, Bush called congressional leaders with whom the administration will be working on the final plan. He spoke to Senate Majority Leader Harry Reid, D-Nev., House Speaker Nancy Pelosi, D-Calif., Senate Republican leader Mitch McConnell of Kentucky and House GOP leader John Boehner of Ohio.
The administration wants to see a package emerge from the weekend, to lend calm to Monday morning's market openings, said Keith Hennessey, the director of the president's economic council. The goal is to have something passed by Congress by the end of next week, when lawmakers recess for the elections.
Paulson said Fannie Mae and Freddie Mac will step up their purchases of mortgage-backed securities to help provide support to the crippled housing market. He also said the Treasury Department will expand a program, announced earlier this month, to buy mortgage-backed securities, which have been badly hurt by the housing and credit crises.
"As we all know, lax lending practices earlier this decade led to irresponsible lending and irresponsible borrowing. This simply put too many families into mortgages they could not afford," Paulson said.
Bush authorized Treasury to tap up to $50 billion from a Depression-era fund to insure the holdings of eligible money-market mutual funds. And the Federal Reserve announced it would expand its emergency lending program to help support the $3.4 trillion in total assets of the funds.
On Wednesday alone, investors had pulled more than $89 billion from money-market funds, according to iMoneyNet, publisher of the newsletter Money Fund Report.
The government's actions could help alleviate the uncertainty that has been sending the markets into tumult over the past week. Lending has come to a virtual standstill in the wake of the bankruptcy of Lehman Brothers Holdings Inc. (LEH)
European Central Bank, Swiss National Bank and Bank of England also offered up more cash Friday. The three banks put a combined $90 billion into money markets.
Relieved investors sent stocks soaring on Wall Street and around the globe. The Dow-Jones industrials average rose 368 points after surging 410 points the day before on rumors the federal action was afoot.
A grim-faced President Bush acknowledged risks to taxpayers in what would be the most sweeping government intervention to rescue failing financial institutions since the Great Depression. But he declared, "The risk of not acting would be far higher."
The administration is asking Congress for far-reaching new powers to take over troubled mortgages from banks and other companies, including purchasing sour mortgage-backed securities. Administration officials and congressional leaders are to work out details over the weekend.
(AP) President Bush walks with Federal Reserve Board Chairman Ben Bernanke, out of the Oval Office of...
Full Image
Congressional officials said they expected a request for legal authority to buy up the bad loans, at a cost in excess of $500 billion to the government. Democrats were discussing whether to try to attach middle class assistance to the legislation, despite a request from Bush to avoid adding controversial items that could delay action. An expansion of jobless benefits was one possibility.
In other major steps, the Treasury Department and Federal Reserve moved to give money-market mutual funds the same kind of federal protection, at least temporarily, that now applies to savings and checking accounts and certificates of deposit at banks. Money-market accounts sold through retail banks are already FDIC insured.
The spreading global selling panic had started to threaten some money-market funds, usually thought of as rock-solid investments. Administration officials feared a run on these funds, held by millions of Americans.
"Every American should know that the federal government continues to enforce laws and regulations protecting your money," Bush said at the White House. The 75-year-old Federal Deposit Insurance Corporation now insures savings and checking accounts and certificates of deposit up to $100,000.
Separately, the Securities and Exchange Commission acted to block short-selling in financial securities. That is a trading method that bets the value of stocks will go down. It has been blamed for accelerating the plunge in stock prices of banks and other financial institutions.
(AP) President Bush, second from left, accompanied by, from left, Federal Reserve Chairman Ben Bernanke,...
Full Image
"This is a pivotal moment for America's economy," Bush said. "In our nation's history, there have been moments that require us to come together across party lines to address major challenges. This is such a moment."
Congressional leaders of both parties welcomed the administration's bold moves, after a series of ad hoc rescues.
The talk on the presidential campaign trail, barely six weeks before the election, was of bipartisanship, too.
Democrat Barack Obama said it was critical that leaders in both parties work in concert. "Truly, we are all in this together," he said.
GOP presidential nominee John McCain said leaders should put aside partisan differences and "any action should be designed to keep people in their homes and safeguard the life savings of all Americans."
(AP) Treasury Secretary Henry Paulson briefs reporters about efforts to heal the crisis in the U.S....
Full Image
The federal government already has pledged more than $600 billion in the past year to bail out, or help bail out, some of the biggest names in American finance. That includes the rescue of investment bank Bear Stearns in March, the takeover of mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE) earlier this month and the takeover of the world's largest insurance company, American International Group, just this week.
But the contagion continued to spread, bringing political consensus that drastic and comprehensive federal action was needed.
There are precedents for such a federal takeover.
In the late 1980s, the government created the Resolution Trust Corporation to tackle the savings and loan crisis. It acquired the defaulted mortgages, foreclosed real estate and other assets of nearly a thousand failed S&Ls, restoring order and stability to the system. Resolving that crisis took six years and $125 billion in taxpayer money - roughly equal to $200 billion in today's dollars.
And there was the Reconstruction Finance Corporation, a Depression-era relief program formed in 1932 by President Hoover that tried to revive the market by giving loans to banks and other businesses.
(AP) Treasury Secretary Henry Paulson briefs reporters about efforts to heal the crisis in the U.S....
Full Image
On Friday, Treasury Secretary Henry Paulson gave few details about the structure of the new program. Asked about an overall price tag, he said, "hundreds of billions" of dollars.
Congressional leaders said they were ready to move quickly but still needed details of the administration plan. For instance, there was no indication of what the government would get in return from financial companies for the federal assistance.
Paulson and Federal Reserve Chairman Ben Bernanke briefed lawmakers in both parties on the idea by conference call Friday.
In a session with House Democrats, they described a plan where the government would in essence set up reverse auctions, putting up money for a class of distressed assets - such as loans that are delinquent but not in default - and financial institutions would compete for how little they would accept for the investments, said Rep. Brad Sherman, D-Calif., who participated in the call.
"You give them good cash; they give you the worst of the worst," Sherman said of the plan, which he complained that Bush and his economic advisers were trying to panic lawmakers into rubber-stamping.
(AP) Graphic shows timeline of credit crisis events with banking and mortgage foreclosures data;
Full Image
Paulson rejected Democrats' calls to include tighter regulations, corporate reforms or limits on executive compensation as part of the measure, Sherman said. "He's doing his best to paint a picture of the sky falling, and then he says, because the sky's falling, you have to do it my way."
Paulson said the new troubled-asset relief program that he wants Congress to enact must be large enough to have the necessary impact while protecting taxpayers as much as possible.
"I am convinced that this bold approach will cost American families far less than the alternative - a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion," Paulson. "The financial security of all Americans ... depends on our ability to restore our financial institutions to a sound footing."
Bush said simply, "We must act now."
"America's economy is facing unprecedented challenges. We're responding with unprecedented measures," Bush declared, standing in the White House Rose Garden with Paulson, Bernanke and Christopher Cox, chairman of the Securities and Exchange Commission.
Shortly after his remarks, Bush called congressional leaders with whom the administration will be working on the final plan. He spoke to Senate Majority Leader Harry Reid, D-Nev., House Speaker Nancy Pelosi, D-Calif., Senate Republican leader Mitch McConnell of Kentucky and House GOP leader John Boehner of Ohio.
The administration wants to see a package emerge from the weekend, to lend calm to Monday morning's market openings, said Keith Hennessey, the director of the president's economic council. The goal is to have something passed by Congress by the end of next week, when lawmakers recess for the elections.
Paulson said Fannie Mae and Freddie Mac will step up their purchases of mortgage-backed securities to help provide support to the crippled housing market. He also said the Treasury Department will expand a program, announced earlier this month, to buy mortgage-backed securities, which have been badly hurt by the housing and credit crises.
"As we all know, lax lending practices earlier this decade led to irresponsible lending and irresponsible borrowing. This simply put too many families into mortgages they could not afford," Paulson said.
Bush authorized Treasury to tap up to $50 billion from a Depression-era fund to insure the holdings of eligible money-market mutual funds. And the Federal Reserve announced it would expand its emergency lending program to help support the $3.4 trillion in total assets of the funds.
On Wednesday alone, investors had pulled more than $89 billion from money-market funds, according to iMoneyNet, publisher of the newsletter Money Fund Report.
The government's actions could help alleviate the uncertainty that has been sending the markets into tumult over the past week. Lending has come to a virtual standstill in the wake of the bankruptcy of Lehman Brothers Holdings Inc. (LEH)
European Central Bank, Swiss National Bank and Bank of England also offered up more cash Friday. The three banks put a combined $90 billion into money markets.
Black Met group cuts manager links
Representatives of ethnic minority officers in the UK's largest police force have severed links with senior managers.
Members of the Metropolitan Black Police Association (MetBPA) said they would disengage from all meetings and have no confidence in top officers.
They said colleagues were "appalled" at the suspension of Commander Ali Dizaei whom they believed was the victim of a "sustained witch-hunt".
The move is the latest chapter in an angry race row that has cast a shadow over Scotland Yard for several months.
Chairman Alfred John said he and other representatives would only attend meetings concerning the reinstatement of Mr Dizaei.
He said: "The MetBPA are appalled at the action taken against Commander Ali Dizaei. Mr Dizaei has been the victim of what we believe to be the culmination of a sustained witch-hunt.
"Mr Dizaei had not received a single complaint for over four years and yet, within the last three weeks, three complaints have materialised."
The senior officer is being investigated after claims that he advised a defence team on a Met prosecution were published. Further allegations concerning an arrest he made while off-duty at a restaurant and over the use of his corporate credit card are also being probed.
Sources close to Mr Dizaei said he strongly denied any wrongdoing and expected to be vindicated within weeks. One close colleague said Mr Dizaei anticipated being suspended and that it was an "act of desperation".
The Metropolitan Police Authority (MPA) announced it had suspended Mr Dizaei on Thursday night after consulting the Independent Police Complaints Commission (IPCC).
Members of the Metropolitan Black Police Association (MetBPA) said they would disengage from all meetings and have no confidence in top officers.
They said colleagues were "appalled" at the suspension of Commander Ali Dizaei whom they believed was the victim of a "sustained witch-hunt".
The move is the latest chapter in an angry race row that has cast a shadow over Scotland Yard for several months.
Chairman Alfred John said he and other representatives would only attend meetings concerning the reinstatement of Mr Dizaei.
He said: "The MetBPA are appalled at the action taken against Commander Ali Dizaei. Mr Dizaei has been the victim of what we believe to be the culmination of a sustained witch-hunt.
"Mr Dizaei had not received a single complaint for over four years and yet, within the last three weeks, three complaints have materialised."
The senior officer is being investigated after claims that he advised a defence team on a Met prosecution were published. Further allegations concerning an arrest he made while off-duty at a restaurant and over the use of his corporate credit card are also being probed.
Sources close to Mr Dizaei said he strongly denied any wrongdoing and expected to be vindicated within weeks. One close colleague said Mr Dizaei anticipated being suspended and that it was an "act of desperation".
The Metropolitan Police Authority (MPA) announced it had suspended Mr Dizaei on Thursday night after consulting the Independent Police Complaints Commission (IPCC).
48-hour rail strike called off
A planned 48-hour strike by over 1,000 drivers, guards and other workers at a leading rail company has been called off following fresh developments, including a legal challenge, it was announced.
Southeastern Trains said it was pleased its legal action had resulted in the Rail Maritime and Transport Union deciding not to go ahead with a walk-out by 500 guards and drivers next Monday and Tuesday in a dispute over the role of guards.
The RMT complained that anti-union laws were used to mount the court challenge, citing a "minor legal technicality".
The union said its dispute with Southeastern over driver-only operation was "far from over", announcing that its reps would be meeting next week to discuss their next move.
General secretary Bob Crow said: "Southeastern's lawyers have pounced on a minor legal technicality that made not one jot of difference to a ballot that returned a massive majority for strike action.
"The anti-union laws were designed to make it as difficult as possible for workers to strike and today the company has used those laws to frustrate the will of RMT guards and drivers who want to stop the extension of driver-only operation.
"Southeastern was shocked by the size of the majority in favour of strike action, and the company knows as well as we do that running to the judges will not make the safety issues at stake go away."
A planned strike by hundreds of retail and engineering workers at Southeastern on the same days was suspended so the union can consider a revised pay offer.
Southeastern Trains said it was pleased its legal action had resulted in the Rail Maritime and Transport Union deciding not to go ahead with a walk-out by 500 guards and drivers next Monday and Tuesday in a dispute over the role of guards.
The RMT complained that anti-union laws were used to mount the court challenge, citing a "minor legal technicality".
The union said its dispute with Southeastern over driver-only operation was "far from over", announcing that its reps would be meeting next week to discuss their next move.
General secretary Bob Crow said: "Southeastern's lawyers have pounced on a minor legal technicality that made not one jot of difference to a ballot that returned a massive majority for strike action.
"The anti-union laws were designed to make it as difficult as possible for workers to strike and today the company has used those laws to frustrate the will of RMT guards and drivers who want to stop the extension of driver-only operation.
"Southeastern was shocked by the size of the majority in favour of strike action, and the company knows as well as we do that running to the judges will not make the safety issues at stake go away."
A planned strike by hundreds of retail and engineering workers at Southeastern on the same days was suspended so the union can consider a revised pay offer.
Schoolboy terrorist gets two years
Britain's youngest terrorist was locked up for two years after plans to cause death and destruction were found hidden in his bedroom.
Schoolboy Hammaad Munshi was just 15 when he was recruited into a worldwide plot to wipe out non-Muslims and longed to become a "martyr".
Munshi, a GCSE student and grandson of a leading Islamic scholar, led a double life, obediently attending school by day and surfing jihadist websites at night.
He was part of a cell of cyber groomers devoted to brainwashing the vulnerable into killing "kuffar", or non-believers.
Munshi, 18, of Greenwood Street, Saville Town, Dewsbury, West Yorks, was found guilty last month of compiling information likely to be useful in terrorism.
London's Blackfriars Crown Court heard how he downloaded files about making napalm, detonators and grenades for himself and terrorist comrades Aabid Khan and Sultan Muhammad.
Sentencing him at the Old Bailey to two years in a young offenders' institution, Judge Timothy Pontius said that he "fell under the spell of fanatical extremists".
He added: "There is no doubt that you knew what you were doing."
Schoolboy Hammaad Munshi was just 15 when he was recruited into a worldwide plot to wipe out non-Muslims and longed to become a "martyr".
Munshi, a GCSE student and grandson of a leading Islamic scholar, led a double life, obediently attending school by day and surfing jihadist websites at night.
He was part of a cell of cyber groomers devoted to brainwashing the vulnerable into killing "kuffar", or non-believers.
Munshi, 18, of Greenwood Street, Saville Town, Dewsbury, West Yorks, was found guilty last month of compiling information likely to be useful in terrorism.
London's Blackfriars Crown Court heard how he downloaded files about making napalm, detonators and grenades for himself and terrorist comrades Aabid Khan and Sultan Muhammad.
Sentencing him at the Old Bailey to two years in a young offenders' institution, Judge Timothy Pontius said that he "fell under the spell of fanatical extremists".
He added: "There is no doubt that you knew what you were doing."
Sex offenders to face lie tests
Sex offenders in some areas will be forced to take lie detector tests to see if they are still a danger to the public, the Ministry of Justice has said.
A pilot scheme will run from next April for three years. Under an earlier, voluntary pilot, nearly 80% of tests prompted admissions.
But fewer than half of those eligible for the tests agreed to be tested. Under the new pilot, paedophiles and other offenders will have no choice.
They will be asked questions while their heart rate, sweating, brain activity and blood pressure are monitored.
The results will be used to check if they are a still a danger to the public and could result in changes to how they are supervised.
But information that comes out during the tests, which last around 90 minutes, cannot be used as evidence.
A consultation document on the rules of the programme was published by the Ministry of Justice.
The areas where the pilots will take place have not been revealed.
If successful, the scheme could be extended across the country.
A pilot scheme will run from next April for three years. Under an earlier, voluntary pilot, nearly 80% of tests prompted admissions.
But fewer than half of those eligible for the tests agreed to be tested. Under the new pilot, paedophiles and other offenders will have no choice.
They will be asked questions while their heart rate, sweating, brain activity and blood pressure are monitored.
The results will be used to check if they are a still a danger to the public and could result in changes to how they are supervised.
But information that comes out during the tests, which last around 90 minutes, cannot be used as evidence.
A consultation document on the rules of the programme was published by the Ministry of Justice.
The areas where the pilots will take place have not been revealed.
If successful, the scheme could be extended across the country.
Pilots call for XL inquiry
Airline pilots have urged the Government to launch an inquiry into the collapse of travel giant XL after voicing a number of concerns which they want putting "under the microscope."
The British Airline Pilots Association said it could not understand how XL planes were flown back to the UK empty while a mission to repatriate thousands of stranded holidaymakers was under way.
Pilots also want a high level review of how compensation claims are dealt with and called on the Government to help workers suddenly laid off by the crisis.
General secretary Jim McAuslan said in a letter to Transport Secretary Ruth Kelly: "The sale of the French and German subsidiaries on the day of the collapse has surprised our members and they want an explanation. It would be too easy for the big financial upheavals of the past week to let the XL situation slip by unremarked.
"It is being suggested to pilots who are owed money that the cupboard is bare. Well, someone's cupboard is not bare.
"The series of collapses highlights the fragility of an industry which employs so many people and contributes so much to the UK economy. The last thing we need is more taxes and we ask you to press the Treasury to call a halt to the plans for aviation duty. The industry needs breathing space."
The British Airline Pilots Association said it could not understand how XL planes were flown back to the UK empty while a mission to repatriate thousands of stranded holidaymakers was under way.
Pilots also want a high level review of how compensation claims are dealt with and called on the Government to help workers suddenly laid off by the crisis.
General secretary Jim McAuslan said in a letter to Transport Secretary Ruth Kelly: "The sale of the French and German subsidiaries on the day of the collapse has surprised our members and they want an explanation. It would be too easy for the big financial upheavals of the past week to let the XL situation slip by unremarked.
"It is being suggested to pilots who are owed money that the cupboard is bare. Well, someone's cupboard is not bare.
"The series of collapses highlights the fragility of an industry which employs so many people and contributes so much to the UK economy. The last thing we need is more taxes and we ask you to press the Treasury to call a halt to the plans for aviation duty. The industry needs breathing space."
Soaring bank shares reverse slide
Spectacular gains for banking stocks left London's leading share index near to reversing the 10% slide seen in this week's financial turmoil.
The improvement came after news of a huge US rescue plan to relieve banks of their "toxic" assets and a temporary City ban on short-selling.
The FTSE 100 Index rocketed more than 8% at one point to leave it on course for its biggest one-day gain since being established more than 24 years ago.
Royal Bank of Scotland topped the list of shares, up 40%. Lloyds TSB, which fell sharply on fears over its financial strength, lifted 35%, or 83p, to 320.5p.
European stock markets were also soaring, with Paris's CAC 40 7% up and Frankfurt's Dax 5% higher.
Gordon Brown also moved to calm nerves, saying: "We are now working with our international partners about broader intervention we are in a position to take."
US Treasury Secretary Hank Paulson provided the main market boost after revealing he was hatching a plan to rescue banks from their billions of dollars worth of "distressed" mortgage-backed assets and which have led to the global banking crisis.
"We're coming together to work for an expeditious solution which is aimed right at the heart of this problem," Mr Paulson said.
New York's main share index responded by posting its biggest gain for nearly six years on Thursday - up 410 points or nearly 4% - while Hong Kong's Hang Seng leapt nearly 10%.
The turnaround in London also came after the Financial Services Authority issued its temporary ban on the "short selling" of listed financial firm stocks - in which traders look to profit from falling share prices - in a bid to quell the market turmoil.
The improvement came after news of a huge US rescue plan to relieve banks of their "toxic" assets and a temporary City ban on short-selling.
The FTSE 100 Index rocketed more than 8% at one point to leave it on course for its biggest one-day gain since being established more than 24 years ago.
Royal Bank of Scotland topped the list of shares, up 40%. Lloyds TSB, which fell sharply on fears over its financial strength, lifted 35%, or 83p, to 320.5p.
European stock markets were also soaring, with Paris's CAC 40 7% up and Frankfurt's Dax 5% higher.
Gordon Brown also moved to calm nerves, saying: "We are now working with our international partners about broader intervention we are in a position to take."
US Treasury Secretary Hank Paulson provided the main market boost after revealing he was hatching a plan to rescue banks from their billions of dollars worth of "distressed" mortgage-backed assets and which have led to the global banking crisis.
"We're coming together to work for an expeditious solution which is aimed right at the heart of this problem," Mr Paulson said.
New York's main share index responded by posting its biggest gain for nearly six years on Thursday - up 410 points or nearly 4% - while Hong Kong's Hang Seng leapt nearly 10%.
The turnaround in London also came after the Financial Services Authority issued its temporary ban on the "short selling" of listed financial firm stocks - in which traders look to profit from falling share prices - in a bid to quell the market turmoil.
US rescue plan boosts UK markets
Financial shares made spectacular gains after news of a US rescue plan and a ban on short-selling boosted the ailing sector.
The FTSE 100 Index was up by more than 6% - or 300 points - after bluechips including Royal Bank of Scotland and Lloyds TSB rose in excess of 30%.
The turnaround in sentiment came after the Financial Services Authority banned "short-selling" of listed financial firm stocks - in which traders look to profit from falling share prices - to try to quell the turmoil in the market.
And the mood for markets worldwide was boosted after US Treasury Secretary Hank Paulson said he was hatching a plan to rescue banks from the "toxic" assets that have led to the crisis.
New York's main share index responded by posting its biggest gain for nearly six years - up 410 points or nearly 4%.
Matt Buckland, a dealer at CMC Markets, said central government intervention had boosted markets worldwide. He said: "The combined efforts are so great that there seems to be a coherent belief that this could actually be sufficient to draw a line under what has been a tumultuous 18 months for the markets."
The ban on short-selling in financial shares looked to have removed uncertainty facing shares across the beleaguered banking sector.
Under the Financial Services Authority (FSA) ruling, traders are not allowed to "short" positions in listed financial companies - a practice known as "short selling". The ban came into force at midnight and will last for at least the next four months.
"Short-selling" is when investors borrow stocks in a company to sell them, hoping to buy them back at a cheaper price later on and return them, pocketing the difference as profit.
The practice has been blamed for a run on HBOS shares this week, which led to the group agreeing a £12 billion takeover offer from rival Lloyds TSB.
The FTSE 100 Index was up by more than 6% - or 300 points - after bluechips including Royal Bank of Scotland and Lloyds TSB rose in excess of 30%.
The turnaround in sentiment came after the Financial Services Authority banned "short-selling" of listed financial firm stocks - in which traders look to profit from falling share prices - to try to quell the turmoil in the market.
And the mood for markets worldwide was boosted after US Treasury Secretary Hank Paulson said he was hatching a plan to rescue banks from the "toxic" assets that have led to the crisis.
New York's main share index responded by posting its biggest gain for nearly six years - up 410 points or nearly 4%.
Matt Buckland, a dealer at CMC Markets, said central government intervention had boosted markets worldwide. He said: "The combined efforts are so great that there seems to be a coherent belief that this could actually be sufficient to draw a line under what has been a tumultuous 18 months for the markets."
The ban on short-selling in financial shares looked to have removed uncertainty facing shares across the beleaguered banking sector.
Under the Financial Services Authority (FSA) ruling, traders are not allowed to "short" positions in listed financial companies - a practice known as "short selling". The ban came into force at midnight and will last for at least the next four months.
"Short-selling" is when investors borrow stocks in a company to sell them, hoping to buy them back at a cheaper price later on and return them, pocketing the difference as profit.
The practice has been blamed for a run on HBOS shares this week, which led to the group agreeing a £12 billion takeover offer from rival Lloyds TSB.
2008-09-18
Swiss restaurant to serve meals cooked with human breast milk
A Swiss gastronomist has stirred a controversy in the tranquil Alpine republic after announcing that he will serve meals cooked with human breast milk.
The owner of the Storchen restaurant in the exclusive Winterthur resort will improve his menu with local specialities such as meat stew and various soups and sauces containing at least 75 per cent of mother's milk.
"We have all been raised on it. Why should we not include it into our diet?" Hans Locher, who has become Switzerland most controversial restaurant owner, said.
Mr Locher attracted the attention of the leading media of the German-speaking world this week after he posted ads looking for women donors, who will receive just over three pounds for 14 ounces of their milk.
He said: "I first experimented with breast milk when my daughter was born.
"One can cook really delicious things with it. However, it always needs to be mixed with a bit of whipped cream, in order to keep the consistency."
The food control authority in Switzerland was initially confused by the apparent loophole in local legislation regulating the use of human milk and it was not clear whether Mr Locher could actually be banned from serving his specialities.
"Humans as producers of milk are simply not envisaged in the legislation.
"They are not on the list of approved species such as cows and sheep, but they are also not on the list of the banned species such as apes and primates," Rolf Etter of the Zurich food control laboratory said.
The owner of the Storchen restaurant in the exclusive Winterthur resort will improve his menu with local specialities such as meat stew and various soups and sauces containing at least 75 per cent of mother's milk.
"We have all been raised on it. Why should we not include it into our diet?" Hans Locher, who has become Switzerland most controversial restaurant owner, said.
Mr Locher attracted the attention of the leading media of the German-speaking world this week after he posted ads looking for women donors, who will receive just over three pounds for 14 ounces of their milk.
He said: "I first experimented with breast milk when my daughter was born.
"One can cook really delicious things with it. However, it always needs to be mixed with a bit of whipped cream, in order to keep the consistency."
The food control authority in Switzerland was initially confused by the apparent loophole in local legislation regulating the use of human milk and it was not clear whether Mr Locher could actually be banned from serving his specialities.
"Humans as producers of milk are simply not envisaged in the legislation.
"They are not on the list of approved species such as cows and sheep, but they are also not on the list of the banned species such as apes and primates," Rolf Etter of the Zurich food control laboratory said.
Democratic Congress May Adjourn, Leave Crisis to Fed, Treasury
Sept. 18 (Bloomberg) -- The Democratic-controlled Congress, acknowledging that it isn't equipped to lead the way to a solution for the financial crisis and can't agree on a path to follow, is likely to just get out of the way.
Lawmakers say they are unlikely to take action before, or to delay, their planned adjournments -- Sept. 26 for the House of Representatives, a week later for the Senate. While they haven't ruled out returning after the Nov. 4 elections, they would rather wait until next year unless Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke, who are leading efforts to contain the crisis, call for help.
One reason, Senate Majority Leader Harry Reid said yesterday, is that ``no one knows what to do'' at the moment.
``When you rush to judgment, you usually make mistakes,'' said Sherwood Boehlert, a former Republican congressman from New York. ``This is something you can't go on forever without addressing, but Congress in a short span of time is best served by going home.''
In 2002, after accounting scandals forced Enron Corp. and WorldCom Inc. into bankruptcy, Congress passed the Sarbanes-Oxley law, setting new corporate-governance rules. While the measure passed unanimously in the Senate and overwhelmingly in the House, it has since become a target of criticism from some Republicans, including presidential candidate John McCain, and from many in the business and financial worlds.
``There's a huge danger that needs to be guarded against -- that we'll have a tremendous overreaction in regulations,'' former Treasury Secretary John Snow said in an interview.
Reid's `Despair'
Still, the Democrats opened themselves up for attack with Reid's comments. The Republican National Committee pounced on the Nevada lawmaker for his ``despair,'' and Senator Mel Martinez, a Florida Republican, said his remarks are ``not a way to inspire confidence or begin to turn the tide.''
And there were some calls for at least a bipartisan show of leadership during the crisis, which has resulted in the collapse of mortgage giants Fannie Mae and Freddie Mac, investment banks Lehman Brothers Holdings Inc. and Bear Stearns Cos., and insurer American International Group Inc., among other companies.
Unless party leaders on both sides of the aisle join with President George W. Bush to endorse a solution, there's little Congress and the president can do in the near term to restore market confidence, said Chuck Gabriel, managing director of Capital Alpha Partners LLC, which advises investors on politics and Washington.
White House Lawn
Wall Street would respond positively ``if the president and Treasury Secretary Paulson and a couple of Cabinet members and the Republican and Democratic leadership all went on the White House lawn and said that we are resolved to taking additional measures in the coming weeks despite the elections to ensure that confidence is restored,'' Gabriel said.
``But the odds of that seem very, very low.''
Some committee chairmen have scheduled hearings and promised better oversight.
Representative Henry Waxman, chairman of the House Oversight and Government Reform Committee, will hold two days of hearings on Oct. 6 and 7 ``to examine what went wrong and who should be held to account'' at AIG and Lehman Brothers, which filed for bankruptcy on Sept. 15.
Waxman's committee summoned Lehman Chief Executive Officer Richard Fuld, AIG CEO Robert Willumstad and former AIG chiefs Maurice ``Hank'' Greenberg and Martin Sullivan to speak.
`Work Will Continue'
House Speaker Nancy Pelosi defended the decision of Congress to adjourn. Lawmakers can always be recalled to Washington ``if there is a need to do so,'' she told reporters yesterday. In the meantime, House and Senate committees will hold hearings and the financial crisis will be studied by Congress, she said. ``Our work will continue even if we are not still on the floor,'' she said.
House Financial Services Committee Chairman Barney Frank said Congress could give the Federal Reserve authority to pay interest on bank reserves sooner than originally scheduled.
``They already have the authority; it's just a question of moving it up a couple of years,'' Frank, of Massachusetts, told reporters yesterday. ``We're trying to work that out.''
Senate Banking Committee Chairman Christopher Dodd said the Fed also has the power to buy and dispose of bad debt stemming from the subprime-mortgage crisis.
``The Fed has the authority to move in this area,'' Dodd told reporters in Washington.
No `Quick Fixes'
Creating a separate agency to take on bad debt, akin to the Resolution Trust Corp. set up in 1989 to absorb losses from savings-and-loan associations, would take about a year, he said. Instead, the Fed should use its own authority to act.
Senator Johnny Isakson, a Georgia Republican active on housing issues, scoffed at suggestions that lawmakers postpone adjournment to rewrite laws governing the financial markets.
``The last thing you need,'' he said, ``are 535 people, not many of whom are that well-versed in financial markets, trying to do quick fixes to a market correction that's one of the more significant that we've ever seen.''
Lawmakers say they are unlikely to take action before, or to delay, their planned adjournments -- Sept. 26 for the House of Representatives, a week later for the Senate. While they haven't ruled out returning after the Nov. 4 elections, they would rather wait until next year unless Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke, who are leading efforts to contain the crisis, call for help.
One reason, Senate Majority Leader Harry Reid said yesterday, is that ``no one knows what to do'' at the moment.
``When you rush to judgment, you usually make mistakes,'' said Sherwood Boehlert, a former Republican congressman from New York. ``This is something you can't go on forever without addressing, but Congress in a short span of time is best served by going home.''
In 2002, after accounting scandals forced Enron Corp. and WorldCom Inc. into bankruptcy, Congress passed the Sarbanes-Oxley law, setting new corporate-governance rules. While the measure passed unanimously in the Senate and overwhelmingly in the House, it has since become a target of criticism from some Republicans, including presidential candidate John McCain, and from many in the business and financial worlds.
``There's a huge danger that needs to be guarded against -- that we'll have a tremendous overreaction in regulations,'' former Treasury Secretary John Snow said in an interview.
Reid's `Despair'
Still, the Democrats opened themselves up for attack with Reid's comments. The Republican National Committee pounced on the Nevada lawmaker for his ``despair,'' and Senator Mel Martinez, a Florida Republican, said his remarks are ``not a way to inspire confidence or begin to turn the tide.''
And there were some calls for at least a bipartisan show of leadership during the crisis, which has resulted in the collapse of mortgage giants Fannie Mae and Freddie Mac, investment banks Lehman Brothers Holdings Inc. and Bear Stearns Cos., and insurer American International Group Inc., among other companies.
Unless party leaders on both sides of the aisle join with President George W. Bush to endorse a solution, there's little Congress and the president can do in the near term to restore market confidence, said Chuck Gabriel, managing director of Capital Alpha Partners LLC, which advises investors on politics and Washington.
White House Lawn
Wall Street would respond positively ``if the president and Treasury Secretary Paulson and a couple of Cabinet members and the Republican and Democratic leadership all went on the White House lawn and said that we are resolved to taking additional measures in the coming weeks despite the elections to ensure that confidence is restored,'' Gabriel said.
``But the odds of that seem very, very low.''
Some committee chairmen have scheduled hearings and promised better oversight.
Representative Henry Waxman, chairman of the House Oversight and Government Reform Committee, will hold two days of hearings on Oct. 6 and 7 ``to examine what went wrong and who should be held to account'' at AIG and Lehman Brothers, which filed for bankruptcy on Sept. 15.
Waxman's committee summoned Lehman Chief Executive Officer Richard Fuld, AIG CEO Robert Willumstad and former AIG chiefs Maurice ``Hank'' Greenberg and Martin Sullivan to speak.
`Work Will Continue'
House Speaker Nancy Pelosi defended the decision of Congress to adjourn. Lawmakers can always be recalled to Washington ``if there is a need to do so,'' she told reporters yesterday. In the meantime, House and Senate committees will hold hearings and the financial crisis will be studied by Congress, she said. ``Our work will continue even if we are not still on the floor,'' she said.
House Financial Services Committee Chairman Barney Frank said Congress could give the Federal Reserve authority to pay interest on bank reserves sooner than originally scheduled.
``They already have the authority; it's just a question of moving it up a couple of years,'' Frank, of Massachusetts, told reporters yesterday. ``We're trying to work that out.''
Senate Banking Committee Chairman Christopher Dodd said the Fed also has the power to buy and dispose of bad debt stemming from the subprime-mortgage crisis.
``The Fed has the authority to move in this area,'' Dodd told reporters in Washington.
No `Quick Fixes'
Creating a separate agency to take on bad debt, akin to the Resolution Trust Corp. set up in 1989 to absorb losses from savings-and-loan associations, would take about a year, he said. Instead, the Fed should use its own authority to act.
Senator Johnny Isakson, a Georgia Republican active on housing issues, scoffed at suggestions that lawmakers postpone adjournment to rewrite laws governing the financial markets.
``The last thing you need,'' he said, ``are 535 people, not many of whom are that well-versed in financial markets, trying to do quick fixes to a market correction that's one of the more significant that we've ever seen.''
Fed announces $180bln cash flood to fight crisis
The US Federal Reserve announced a 180-billion-dollar cash line to fight the racing fires of global financial crisis Thursday, as leading central banks said they would join in.
The Federal Reserve said it was expanding its temporary arrangements for banks to obtain dollars by 180 billion "to provide dollar funding for both term and overnight liquidity operations by other central banks."
The move was to fight "continued elevated pressures in US dollar short-term funding markets," the Federal Reserve said.
The Fed's statement concerned "reciprocal arrangements", which several central banks had authorised to run up to January 30, 2009, or for another four and a half months.
Central banks have intervened massively with direct cash injections since financial disaster struck Wall Street at the weekend.
The Fed said those actions, and the latest more technical measures to relieve tension on the dollar money market, "are designed to improve the liquidity conditions in global financial markets."
The Fed acted minutes after the Bank of England announced that leading central banks around the world would make a concerted onslaught through intervention in money markets.
These extraordinary statements came after wild falls on stock markets and US Treasury bond yields, a surge in the price of gold, reports that investment bank Morgan Stanley is looking for help after the collapse of Lehman Brothers, and uncertainty after the nationalisation of AIG insurance.
The Fed said in a statement that it had "authorized increases in the existing swap lines with the ECB and the Swiss National Bank."
It said the Japanese, British and Canadian central banks had also increased their arrangements giving access to dollars through so-called "swap" arrangements
It gave the amounts as 60 billion dollars for the Japanese bank, 40 billion dollars by the Bank of England and 10 billion dollars by the Canadian bank.
The Fed said its own latest massive liquidity window for the banking system would back up such support of 110 billion dollars by the European Central Bank, marking an increase in its facility of 55 billion dollars, and 27 billion dollars by the Swiss bank, an increase of 15 billion dollars.
The Federal Reserve said it was expanding its temporary arrangements for banks to obtain dollars by 180 billion "to provide dollar funding for both term and overnight liquidity operations by other central banks."
The move was to fight "continued elevated pressures in US dollar short-term funding markets," the Federal Reserve said.
The Fed's statement concerned "reciprocal arrangements", which several central banks had authorised to run up to January 30, 2009, or for another four and a half months.
Central banks have intervened massively with direct cash injections since financial disaster struck Wall Street at the weekend.
The Fed said those actions, and the latest more technical measures to relieve tension on the dollar money market, "are designed to improve the liquidity conditions in global financial markets."
The Fed acted minutes after the Bank of England announced that leading central banks around the world would make a concerted onslaught through intervention in money markets.
These extraordinary statements came after wild falls on stock markets and US Treasury bond yields, a surge in the price of gold, reports that investment bank Morgan Stanley is looking for help after the collapse of Lehman Brothers, and uncertainty after the nationalisation of AIG insurance.
The Fed said in a statement that it had "authorized increases in the existing swap lines with the ECB and the Swiss National Bank."
It said the Japanese, British and Canadian central banks had also increased their arrangements giving access to dollars through so-called "swap" arrangements
It gave the amounts as 60 billion dollars for the Japanese bank, 40 billion dollars by the Bank of England and 10 billion dollars by the Canadian bank.
The Fed said its own latest massive liquidity window for the banking system would back up such support of 110 billion dollars by the European Central Bank, marking an increase in its facility of 55 billion dollars, and 27 billion dollars by the Swiss bank, an increase of 15 billion dollars.
Russia ratchets up US tensions with arms sales to Iran and Venezuela
Russia's strategic aircraft, the Tu-160 or White Swan, the world's largest supersonic bomber. A pair of them touched down in Venezuela this week as Moscow announced big new arms sales
Tony Halpin in Moscow and Alexi Mostrous in Washington
Russia defied the United States yesterday by announcing plans to sell military hardware to Iran and Venezuela.
The head of the state arms exporter said that he was negotiating to sell antiaircraft systems to Iran despite American objections. Russia has already delivered 29 Tor-M1 missile systems under a $700 million (£386 million) deal with Iran in 2005.
“Contacts between our countries are continuing and we do not see any reason to suspend them,” Anatoli Isaikin, the general director of Rosoboronexport, told the RIA-Novosti news agency at an arms fair in South Africa.
Reports have circulated for some time that the Kremlin is preparing to sell its S300 surface-to-air missile system to Iran, offering greater protection against a possible US or Israeli attack on the Islamic republic’s nuclear facilities. The missiles have a range of more than 90 miles (150km).
Related Links
Iran a distraction but Palestinian pact is vital
Medvedev makes Russia Arctic annexation threat
Putin set to bait US with nuclear aid for Tehran
Sergei Chemezov, the head of the state-owned Russian Technologies, also disclosed that Venezuela’s leader, Hugo Chávez, wanted to buy antiaircraft systems, armoured personnel carriers, and SU35 fighter jets when they come into production in 2010.
The Deputy Prime Minister, Igor Sechin, one of the closest allies of Mr Putin, the Prime Minister, visited Venezuela and Cuba this week. Kommersant, the financial newspaper, said that Russia was forming “alliance relations” with the two antiAmerican regimes as a response to US involvement in former Soviet republics.
The Russian moves mark a serious deterioration in relations between Washington and Moscow. Condoleezza Rice, the US Secretary of State, threated to block Russia’s membership of key international organisations. She told the Kremlin that its “authoritarian policies” could prevent it from joining the World Trade Organisation and the Organisation for Economic Cooperation and Development, which coordinates economic policies among industrialised countries. In an outspoken speech to the German Marshall Fund, an institution promoting greater cooperation between America and Europe, Dr Rice said: “The picture emerging is of a Russia increasingly authoritarian at home and aggressive abroad.
“Russia’s bid to join the World Trade Organisation is now in question. And so too is its attempt to join the Organisation for Economic Cooperation and Development.”
She added: “Russia’s international standing is worse now than at any time since 1991.”
The WTO is due to meet in Geneva on Thursday to discuss Russia’s bid to join the global trade body, a process that began in 1993, soon after the collapse of the Soviet Union.
Dr Rice said that Russia’s actions in Georgia fitted into a “worsening pattern of behaviour”, which included its “intimidation of its sovereign neighbours, its use of oil and gas as a political weapon, its threat to target peaceful nations with nuclear weapons, its arms sales to states and groups that threaten international security and its persecution – and worse – of Russian journalists and dissidents.”
She repeated the US commitment to put forward a $1 billion economic support package for Georgia. The European Union has already pledged $500 million.
At the heart of the dispute between the two former Cold War adversaries is Moscow’s insistence that America and its Nato allies are interfering in Russia’s “near abroad” and threatening its interests. The Kremlin is furious about plans to site an antimissile shield in Eastern Europe. The interceptors are designed to stop ballistic missile attacks from Iran but Russia believes the system in Poland and the Czech Republic is aimed at weakening its military capability.
Ruslan Pukhov, the director of the Centre for Analysis of Strategies and Technologies in Moscow, said that it was logical to conclude a lucrative contract with Iran “in the current situation, when the US and the West in general are stubbornly gearing toward a confrontation with Russia”.
Deadly deals
— Russia is believed to export arms to about 80 countries
— Venezuela bought Russian fighter jets and helicopters worth £540 million in 2006; Indonesia bought a similar amount in 2007
— China’s arms deals with Russia were worth £1 billion a year but dwindled in 2006 and no new contracts are planned
— In 2005 Russia agreed to sell 30 Tor M-1 air-defence missile systems to Iran
Tony Halpin in Moscow and Alexi Mostrous in Washington
Russia defied the United States yesterday by announcing plans to sell military hardware to Iran and Venezuela.
The head of the state arms exporter said that he was negotiating to sell antiaircraft systems to Iran despite American objections. Russia has already delivered 29 Tor-M1 missile systems under a $700 million (£386 million) deal with Iran in 2005.
“Contacts between our countries are continuing and we do not see any reason to suspend them,” Anatoli Isaikin, the general director of Rosoboronexport, told the RIA-Novosti news agency at an arms fair in South Africa.
Reports have circulated for some time that the Kremlin is preparing to sell its S300 surface-to-air missile system to Iran, offering greater protection against a possible US or Israeli attack on the Islamic republic’s nuclear facilities. The missiles have a range of more than 90 miles (150km).
Related Links
Iran a distraction but Palestinian pact is vital
Medvedev makes Russia Arctic annexation threat
Putin set to bait US with nuclear aid for Tehran
Sergei Chemezov, the head of the state-owned Russian Technologies, also disclosed that Venezuela’s leader, Hugo Chávez, wanted to buy antiaircraft systems, armoured personnel carriers, and SU35 fighter jets when they come into production in 2010.
The Deputy Prime Minister, Igor Sechin, one of the closest allies of Mr Putin, the Prime Minister, visited Venezuela and Cuba this week. Kommersant, the financial newspaper, said that Russia was forming “alliance relations” with the two antiAmerican regimes as a response to US involvement in former Soviet republics.
The Russian moves mark a serious deterioration in relations between Washington and Moscow. Condoleezza Rice, the US Secretary of State, threated to block Russia’s membership of key international organisations. She told the Kremlin that its “authoritarian policies” could prevent it from joining the World Trade Organisation and the Organisation for Economic Cooperation and Development, which coordinates economic policies among industrialised countries. In an outspoken speech to the German Marshall Fund, an institution promoting greater cooperation between America and Europe, Dr Rice said: “The picture emerging is of a Russia increasingly authoritarian at home and aggressive abroad.
“Russia’s bid to join the World Trade Organisation is now in question. And so too is its attempt to join the Organisation for Economic Cooperation and Development.”
She added: “Russia’s international standing is worse now than at any time since 1991.”
The WTO is due to meet in Geneva on Thursday to discuss Russia’s bid to join the global trade body, a process that began in 1993, soon after the collapse of the Soviet Union.
Dr Rice said that Russia’s actions in Georgia fitted into a “worsening pattern of behaviour”, which included its “intimidation of its sovereign neighbours, its use of oil and gas as a political weapon, its threat to target peaceful nations with nuclear weapons, its arms sales to states and groups that threaten international security and its persecution – and worse – of Russian journalists and dissidents.”
She repeated the US commitment to put forward a $1 billion economic support package for Georgia. The European Union has already pledged $500 million.
At the heart of the dispute between the two former Cold War adversaries is Moscow’s insistence that America and its Nato allies are interfering in Russia’s “near abroad” and threatening its interests. The Kremlin is furious about plans to site an antimissile shield in Eastern Europe. The interceptors are designed to stop ballistic missile attacks from Iran but Russia believes the system in Poland and the Czech Republic is aimed at weakening its military capability.
Ruslan Pukhov, the director of the Centre for Analysis of Strategies and Technologies in Moscow, said that it was logical to conclude a lucrative contract with Iran “in the current situation, when the US and the West in general are stubbornly gearing toward a confrontation with Russia”.
Deadly deals
— Russia is believed to export arms to about 80 countries
— Venezuela bought Russian fighter jets and helicopters worth £540 million in 2006; Indonesia bought a similar amount in 2007
— China’s arms deals with Russia were worth £1 billion a year but dwindled in 2006 and no new contracts are planned
— In 2005 Russia agreed to sell 30 Tor M-1 air-defence missile systems to Iran
Experts Don't Yahoo! Over Palin's E-Mail Practices
It's not a great idea to run a government using Yahoo! e-mail accounts.
Gov. Sarah Palin's e-mail habit of using a private account to communicate with aides echos the worst practices of the Bush administration, says one expert.
(ABCNews Photo Illustration)That's the word from experts, anyway, reacting to news that Alaska Gov. Sarah Palin's Yahoo! e-mail had been hacked earlier this week. McCain's vice-presidential pick apparently used the accounts to communicate with key aides about government business.
The practice is dangerous, said experts, and can run counter to laws ensuring government is open and accountable -- a tough point for Palin, who has made "open government" a catchphrase of her political identity.
By using non-governmental email systems, "Your information is out there available, beyond the official mechanisms there to protect it," said Amit Yoran, the nation's first cybersecurity chief. Yoran is now CEO of Netwitness Corp., a computer security firm for government and private entities.
Gov. Sarah Palin's e-mail habit of using a private account to communicate with aides echos the worst practices of the Bush administration, says one expert.
(ABCNews Photo Illustration)That's the word from experts, anyway, reacting to news that Alaska Gov. Sarah Palin's Yahoo! e-mail had been hacked earlier this week. McCain's vice-presidential pick apparently used the accounts to communicate with key aides about government business.
The practice is dangerous, said experts, and can run counter to laws ensuring government is open and accountable -- a tough point for Palin, who has made "open government" a catchphrase of her political identity.
By using non-governmental email systems, "Your information is out there available, beyond the official mechanisms there to protect it," said Amit Yoran, the nation's first cybersecurity chief. Yoran is now CEO of Netwitness Corp., a computer security firm for government and private entities.
Banks' demand huge in ECB's first 1-day dollar auction
FRANKFURT, Sept 18 (Reuters) - Euro zone banks showed huge demand in the European Central Bank's first-ever tender of overnight U.S. dollar funds on Thursday, part of global central bank efforts to ease money market tensions.
Some 61 banks bid for $101.68 billion in funds, compared to the $40 billion that the ECB had said it intended to allot.
The ECB allotted the funds at a single rate of 4.00 percent, the highest rate at which it could find takers for the full $40 billion, after it invited banks to submit bids in a Dutch auction procedure.
The U.S. Federal Reserve's key interest rate is 2 percent, and overnight funds were being offered in Europe at an indicative bid/ask spread of 2-3 percent according to Reuters data before the auction.
The world's top central banks said on Thursday they will pump more than $180 billion in extra dollar funds into global money markets in a coordinated effort to ease a funding squeeze triggered by the upheaval on Wall Street.
Demand for dollars at the ECB's auction was far stronger than that at one held by the Bank of England earlier on Thursday, when the BoE could find takers for little more than a third of the $40 billion it could have lent.
The BoE allotted funds at rates of 1.9 percent and above for a weighted average rate of 3.802 percent.
Some 61 banks bid for $101.68 billion in funds, compared to the $40 billion that the ECB had said it intended to allot.
The ECB allotted the funds at a single rate of 4.00 percent, the highest rate at which it could find takers for the full $40 billion, after it invited banks to submit bids in a Dutch auction procedure.
The U.S. Federal Reserve's key interest rate is 2 percent, and overnight funds were being offered in Europe at an indicative bid/ask spread of 2-3 percent according to Reuters data before the auction.
The world's top central banks said on Thursday they will pump more than $180 billion in extra dollar funds into global money markets in a coordinated effort to ease a funding squeeze triggered by the upheaval on Wall Street.
Demand for dollars at the ECB's auction was far stronger than that at one held by the Bank of England earlier on Thursday, when the BoE could find takers for little more than a third of the $40 billion it could have lent.
The BoE allotted funds at rates of 1.9 percent and above for a weighted average rate of 3.802 percent.
Six central banks flood markets with cash (Roundup)
Frankfurt - Six major central banks pumped billions of US dollars of extra short-term credit into the world's financial markets Thursday, amid fears that this week's crisis was drying up liquidity.
European share prices steadied after the joint operation, which was triggered by the growing reluctance of commercial banks to lend one another money in a week where one financial institution after another has succumbed.
Commercial banks scrambled for the new money in Frankfurt, with 61 banks bidding for 100 billion dollars in an auction quickly organized by the European Central Bank (ECB).
The money came from the US Federal Reserve by way of swaps. The Fed said the joint operation had made available 247 billion dollars outside the United States to bridge shortfalls of dollars, thus quadrupling dollar availability.
The swap arrangements were to last till January 2009.
The biggest taker, the ECB, said its dollar funding operations would more than double from the existing 50 billion dollars to 110 billion dollars. The measures were 'designed to address elevated pressures in the short-term US dollar funding markets.'
The ECB said it lent a total 40 billion euros Thursday in the initial auction, setting the minimum interest rate at 4.0 per cent. Commercial banks can borrow the central banks' dollars by using their own financial assets as security.
Thursday's injection was the latest of a several interventions by central banks this year to ward off a crisis.
The Swiss National Bank is to inject 27 billion dollars into markets and the Bank of Japan (BOJ) valued its part in the currency swap with the Federal Reserve at 60 billion dollars. The Bank of Canada was also involved.
The Bank of England said it would pump 40 billion dollars into markets.
'These measures, together with other actions taken in the last few days by individual central banks, are designed to improve the liquidity conditions in global financial markets,' the Bank of England said.
European share prices steadied after the cash injections.
Germany's bellwether index, the DAX, rose 0.9 per cent to 5913 by early afternoon. London's FTSE 100 index rose 1.6 per cent to 4989. The CAC 40 in Paris gained 0.6 per cent to 4025.
Robert Halver, a markets analyst at Baader Bank, said in Frankfurt, 'The central banks are letting liquidity flood through every crack to stop the domino effect among financial institutions.'
He was referring to the series of crises that began with Monday's failure of Lehman Brothers in New York and culminated Thursday in British bank Lloyds taking over mortgage lender Halifax Bank of Scotland for 12.2 billion pounds.
European share prices steadied after the joint operation, which was triggered by the growing reluctance of commercial banks to lend one another money in a week where one financial institution after another has succumbed.
Commercial banks scrambled for the new money in Frankfurt, with 61 banks bidding for 100 billion dollars in an auction quickly organized by the European Central Bank (ECB).
The money came from the US Federal Reserve by way of swaps. The Fed said the joint operation had made available 247 billion dollars outside the United States to bridge shortfalls of dollars, thus quadrupling dollar availability.
The swap arrangements were to last till January 2009.
The biggest taker, the ECB, said its dollar funding operations would more than double from the existing 50 billion dollars to 110 billion dollars. The measures were 'designed to address elevated pressures in the short-term US dollar funding markets.'
The ECB said it lent a total 40 billion euros Thursday in the initial auction, setting the minimum interest rate at 4.0 per cent. Commercial banks can borrow the central banks' dollars by using their own financial assets as security.
Thursday's injection was the latest of a several interventions by central banks this year to ward off a crisis.
The Swiss National Bank is to inject 27 billion dollars into markets and the Bank of Japan (BOJ) valued its part in the currency swap with the Federal Reserve at 60 billion dollars. The Bank of Canada was also involved.
The Bank of England said it would pump 40 billion dollars into markets.
'These measures, together with other actions taken in the last few days by individual central banks, are designed to improve the liquidity conditions in global financial markets,' the Bank of England said.
European share prices steadied after the cash injections.
Germany's bellwether index, the DAX, rose 0.9 per cent to 5913 by early afternoon. London's FTSE 100 index rose 1.6 per cent to 4989. The CAC 40 in Paris gained 0.6 per cent to 4025.
Robert Halver, a markets analyst at Baader Bank, said in Frankfurt, 'The central banks are letting liquidity flood through every crack to stop the domino effect among financial institutions.'
He was referring to the series of crises that began with Monday's failure of Lehman Brothers in New York and culminated Thursday in British bank Lloyds taking over mortgage lender Halifax Bank of Scotland for 12.2 billion pounds.
Central Banks Offer Extra Funds to Calm Money Markets (Update6)
Sept. 18 (Bloomberg) -- The Federal Reserve almost quadrupled the amount of dollars central banks can auction around the world to $247 billion in a coordinated bid to ease the worst crisis facing financial markets since the 1920s.
The Fed increased the amount of dollars that the European Central Bank, the Bank of Japan and other counterparts can offer from $67 billion ``to address the continued elevated pressures in U.S. dollar short-term funding markets.'' The Bank of England, the Bank of Canada and the Swiss National Bank also participated.
Policy makers have struggled to revive confidence in markets this week as investors stockpiled money on concern more financial institutions would fail after the bankruptcy of Lehman Brothers Holdings Inc. and the U.S. government bailout of American International Group Inc. The cost to hedge against losses on U.S. government debt climbed to a record yesterday.
``There's a complete lack of faith in the markets,'' said Jim O'Neill, chief economist at Goldman Sachs Group Inc. in London. ``There's a lot of cash hoarding and people losing trust in banks, so the central banks are acting to relieve that. This might not be the last time they have to act.''
Markets welcomed the announcement, which was made in statements from each central bank at 9 a.m. Frankfurt time at the start of European trading. The cost of borrowing dollars overnight slid to 3.84 percent from 5.03 percent yesterday. It was 2.15 percent last week and reached the highest since 2001 on Sept. 15.
Limit Doubled
The Fed, which is adding $50 billion into its own banking system today, will spray dollars around the world via swap lines with other central banks. They can then auction them in their own markets. The ECB, Bank of England and Swiss National Bank allotted a total of $64 billion for one day today.
``The timing, so early in the trading day, shows both the severity of the strains in the interbank market and as well the authorities' determination to resuscitate orderly functioning of the money markets,'' said Julian Callow, head of European economics at Barclays Capital in London.
Under the new arrangements, the ECB doubled the limit of dollars it can get from the Fed to $110 billion and Switzerland's central bank can offer $27 billion, an extra $15 billion. New swap facilities with the Bank of Japan, the Bank of England and the Bank of Canada amount to $60 billion, $40 billion and $10 billion, respectively. The arrangements are authorized until Jan. 30.
Use as Necessary
The ECB said it would offer $40 billion ``for as long as needed'' in overnight funds to the region's banks. It will also increase by $5 billion the amount it lends for 28 days and 84 days to $25 billion and $15 billion. The Swiss National Bank will boost its 28-day auctions to $8 billion and the 84-day offering to $9 billion. Both were previously $6 billion.
The Bank of Canada said it has decided not to draw on its $10 billion swap facility at this time. The Bank of Japan, whose policy board held an emergency meeting today, said it will use its $60 billion as required by market conditions.
In auctions of their own currencies, the ECB today lent 25 billion euros in one-day money and the Bank of England 66.2 billion pounds in one-week loans.
The joint action is the latest attempt by central bankers to avert the financial crisis which deepened this week after Lehman and AIG tumbled and Merrill Lynch & Co. was sold. The crisis began over a year ago after the U.S. housing market imploded and has pushed the world economy to the brink of recession.
Asian Action
As markets seized up this week, central bankers pushed more than $200 billion into markets with those in Japan, Hong Kong, South Korea and Australia doing so again today.
Wall Street's woes have gone global, forcing the U.K. government to sponsor a rescue of mortgage lender HBOS Plc and Russia to pour money into its banks. Russia's government said today it would invest in the country's stock market when it reopens tomorrow. The official Xinhua News Agency said China will buy equity stakes in state-owned banks to stabilize its market.
Swap lines were first established in December when officials joined forces to boost dollar liquidity around the world after interest-rate reductions in the U.S., the U.K. and Canada failed to ease concerns about bank lending. The Fed increased its link with the ECB in July.
The announcement today boosted European shares and U.S. futures, which have been pummeled this week as contagion spread through financial markets. The Standard & Poor's 500 Index futures expiring in December added 15, or 1.3 percent, to 1,177.9 as of 11:22 a.m. in London. More than $19 trillion has been wiped off the value of global stock markets since Oct. 31.
More May Be Needed
Failure to calm markets will see central banks inject even more cash, said Robert Barrie, an economist at Credit Suisse Group in London. Other options central banks could take include accepting greater collateral denominated in foreign currencies and increasing lending to banks abroad.
``The lack of dollars has been making the financial crisis worse around the world, which is why we now have this coordinated response,'' Barrie said.
Since the credit squeeze began in August 2007, central banks have sought to keep apart the need to soothe markets and to combat inflation. They argue that interest rates are a blunt tool for helping markets and that price pressures prevent them from cutting rates. While the Fed slashed its key lending rate to 2 percent, the central bank has left it there since April. The Bank of Japan kept its key rate at 0.5 percent this week and the European Central Bank increased its benchmark to a seven-year high in July.
If the spasms in the markets continue and threaten to derail growth central bankers may shift, although for now they will want to wait, said Kevin Gaynor, head of economics at Royal Bank of Scotland Group Plc in London.
``Partly this is to keep powder dry and partly because cutting interest rates won't make much difference,'' he said.
The Fed increased the amount of dollars that the European Central Bank, the Bank of Japan and other counterparts can offer from $67 billion ``to address the continued elevated pressures in U.S. dollar short-term funding markets.'' The Bank of England, the Bank of Canada and the Swiss National Bank also participated.
Policy makers have struggled to revive confidence in markets this week as investors stockpiled money on concern more financial institutions would fail after the bankruptcy of Lehman Brothers Holdings Inc. and the U.S. government bailout of American International Group Inc. The cost to hedge against losses on U.S. government debt climbed to a record yesterday.
``There's a complete lack of faith in the markets,'' said Jim O'Neill, chief economist at Goldman Sachs Group Inc. in London. ``There's a lot of cash hoarding and people losing trust in banks, so the central banks are acting to relieve that. This might not be the last time they have to act.''
Markets welcomed the announcement, which was made in statements from each central bank at 9 a.m. Frankfurt time at the start of European trading. The cost of borrowing dollars overnight slid to 3.84 percent from 5.03 percent yesterday. It was 2.15 percent last week and reached the highest since 2001 on Sept. 15.
Limit Doubled
The Fed, which is adding $50 billion into its own banking system today, will spray dollars around the world via swap lines with other central banks. They can then auction them in their own markets. The ECB, Bank of England and Swiss National Bank allotted a total of $64 billion for one day today.
``The timing, so early in the trading day, shows both the severity of the strains in the interbank market and as well the authorities' determination to resuscitate orderly functioning of the money markets,'' said Julian Callow, head of European economics at Barclays Capital in London.
Under the new arrangements, the ECB doubled the limit of dollars it can get from the Fed to $110 billion and Switzerland's central bank can offer $27 billion, an extra $15 billion. New swap facilities with the Bank of Japan, the Bank of England and the Bank of Canada amount to $60 billion, $40 billion and $10 billion, respectively. The arrangements are authorized until Jan. 30.
Use as Necessary
The ECB said it would offer $40 billion ``for as long as needed'' in overnight funds to the region's banks. It will also increase by $5 billion the amount it lends for 28 days and 84 days to $25 billion and $15 billion. The Swiss National Bank will boost its 28-day auctions to $8 billion and the 84-day offering to $9 billion. Both were previously $6 billion.
The Bank of Canada said it has decided not to draw on its $10 billion swap facility at this time. The Bank of Japan, whose policy board held an emergency meeting today, said it will use its $60 billion as required by market conditions.
In auctions of their own currencies, the ECB today lent 25 billion euros in one-day money and the Bank of England 66.2 billion pounds in one-week loans.
The joint action is the latest attempt by central bankers to avert the financial crisis which deepened this week after Lehman and AIG tumbled and Merrill Lynch & Co. was sold. The crisis began over a year ago after the U.S. housing market imploded and has pushed the world economy to the brink of recession.
Asian Action
As markets seized up this week, central bankers pushed more than $200 billion into markets with those in Japan, Hong Kong, South Korea and Australia doing so again today.
Wall Street's woes have gone global, forcing the U.K. government to sponsor a rescue of mortgage lender HBOS Plc and Russia to pour money into its banks. Russia's government said today it would invest in the country's stock market when it reopens tomorrow. The official Xinhua News Agency said China will buy equity stakes in state-owned banks to stabilize its market.
Swap lines were first established in December when officials joined forces to boost dollar liquidity around the world after interest-rate reductions in the U.S., the U.K. and Canada failed to ease concerns about bank lending. The Fed increased its link with the ECB in July.
The announcement today boosted European shares and U.S. futures, which have been pummeled this week as contagion spread through financial markets. The Standard & Poor's 500 Index futures expiring in December added 15, or 1.3 percent, to 1,177.9 as of 11:22 a.m. in London. More than $19 trillion has been wiped off the value of global stock markets since Oct. 31.
More May Be Needed
Failure to calm markets will see central banks inject even more cash, said Robert Barrie, an economist at Credit Suisse Group in London. Other options central banks could take include accepting greater collateral denominated in foreign currencies and increasing lending to banks abroad.
``The lack of dollars has been making the financial crisis worse around the world, which is why we now have this coordinated response,'' Barrie said.
Since the credit squeeze began in August 2007, central banks have sought to keep apart the need to soothe markets and to combat inflation. They argue that interest rates are a blunt tool for helping markets and that price pressures prevent them from cutting rates. While the Fed slashed its key lending rate to 2 percent, the central bank has left it there since April. The Bank of Japan kept its key rate at 0.5 percent this week and the European Central Bank increased its benchmark to a seven-year high in July.
If the spasms in the markets continue and threaten to derail growth central bankers may shift, although for now they will want to wait, said Kevin Gaynor, head of economics at Royal Bank of Scotland Group Plc in London.
``Partly this is to keep powder dry and partly because cutting interest rates won't make much difference,'' he said.
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