KBW Nasdaq Bank Index (BKX)

[*~1Best~*]

re: Three Reasons Why Stocks Have Such Violent Swings

Massive bubble burst (trillions derivative bubble), many Americans are in debt, US is going bankrupt after spending life savings, home equities, and credit card debt spending.

Anyone is still being fooled? nobama savior

______________________________________________________________

Three Reasons Why Stocks Have Such Violent Swings

CNBC.com
| 30 Oct 2008 | 01:54 PM ET

Bear markets are noted for their volatility—but more than 300 points in six minutes?

It's not as crazy as it sounds. Some analysts see several important factors contributing to the type of moves that the market witnessed at the close of trading on Wednesday, when the Dow Jones Industrials plummeted from a 250-point gain to a 72-point loss before most people had even realized what happened.

"It's actually not extraordinary," says Jordan Kimmel, a hedge fund and mutual fund manager at Magnet Investment Group in Randolph, N.J. "This is exactly how bear markets end, so it's not that uncommon at the very end of a bear market that has been this severe to see this kind of emotional trading."

The late-day market swing was attributed largely to an out-of-context statement from General Electric chairman Jeff Immelt that some took as an earnings warning from the company, a Dow component and parent of CNBC.

But to market veterans, such a wicked swing in sentiment is merely the symptom of the type of volatility that plagues bear markets. That's because when volume is light—as it typically is in bear markets—the actions of a relatively small number of investors can have a profound impact on stock prices.

So what should investors do in this kind of market? Investment pros have identified three broad factors behind this kind of whipsaw trading—and how you can profit from it.

Speed of Information

Though there are common elements in this bear market with previous downturns, market analysts do see differences.

For one thing, no other bear market has ever had such swift dissemination of information through electronic media, nor the ease of trading that sometimes bedevils this one. That has compounded the volatility.

"It has been exacerbated compared with other bear markets," says Quincy Krosby, chief investment strategist at The Hartford. "With programmed trading everything is very quick, instantaneous. It's been exacerbated by technology, the movement of global information and rumors."

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That came into play sharply following the Immelt rumor.

"What that rumor did—whether it was true or false—the fact that this is a trader's market you're going to extrapolate from that rumor," Krosby says. "That's what happens. They act very quickly, and what happens is you've got to take all this information, all these various headlines, all these disparate headlines, disparate rumors, and you have to distill them in a second and extrapolate from them, and that's what I think happened yesterday."

That rapid pace of information only serves to feed the anxiety that has been prevalent through the market since the credit crisis hit.

"I don't think it's normal, but nothing that has happened over the last several months has really been normal," says Richard Sparks, senior analyst at Schaeffer's Investment Research in Cincinnati. "We're in a market that we've never experienced before. It seems to me to point to how much fear there is in this market."

Traders Play the Swings

The types of market movements that have led to the Dow swinging as much as 1,000 points in a single day essentially involve taking the old strategy of "buy the dips, sell the rallies" and putting it on steroids.

Asked whether bear market rallies can be even this violent, Krosby says, "not even, especially this violent."

"That has been the hallmark of these rallies—sell into strength," she says. "I have to say the volatility we're seeing, the swings are emblematic of a bear market."

As the trend gains steam and the market gets closer to finding a bottom, such swings tend to be larger in terms of points and percentages, and can happen later in the day, especially if the market is at an extremely high or extremely low level.

That's been evidenced throughout the month, as the chart below illustrates.

"You have to be very aggressive in going long at the bottom of ranges and selling when you get to the top of a range," Sparks says.

And the trend gets even more heated with the plethora of funds in the market that are being forced into selling their positions because of the need to raise cash in the volatile market.

Forced Liquidations

"Forced liquidation" is a term on the lips of many market pros, though it may not be something average investors consider very often. That's because the term only applies to the biggest risk-takers—the ones who now seem to be having, because of reduced volume, the most influence on moving the markets.

Traders using leverage to take positions in the market are getting hammered by the changing conditions and are being forced—through margin calls—to liquidate their positions to raise cash to meet their obligations. These orders usually don't come until near the end of the trading day, and they wreak havoc on a market looking for stable ground.

"I believe at this stage everybody who has wanted to sell has sold already and what is left right now—and we'll only hear about this in the future when the story comes out—is the forced liquidations taking place both in hedge funds and mutual funds," says Kimmel, who does not use leverage in the funds he manages.
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"You're seeing a lot of pressure from the liquidation side," he continues. "I don't think this is as fear-driven as it was, say, a few weeks ago. Now it's a question of some healing has already begun but you definitely have some guys leaving funds and that's not to be unexpected at the bottom."

How to Invest

The word "nimble" comes up often when asking investment advisors their strategy in such an environment.

Krosby calls it "the operative verb in this environment" while Sparks also uses the word freely and says being able to turn on a dime when it comes to investing poses unique challenges.

"It requires being nimble more so than in any other market environment that I can remember," he says. "You need to have very tight stops in place."

But the wild swings in the market—the CBOE Volatility Index has soared to previously unimaginable highs—provide opportunity as well.

"Long-term investors or institutional investors will take advantage of a down market to build their positions," Krosby says. "They don't build their positions in one fell swoop. You will take advantage of a selloff, especially if you realize it's more based on rumors or fund liquidating. It helps you in building your positions."

For Kimmel, this has all been the part of constructing a bottom that ultimately will lead to better times ahead.

"The value has been created, the public has been rattled. That's how you end up getting good valuations," he says. "This is how bear markets always end, with a distrust of Wall Street, with a distrust of corporate governance. I believe we were served up a fat, slow pitch and the doom-and-gloomers have been right for a short period of time. Then they'll go away again."
© 2008 CNBC.com

URL: http://www.cnbc.com/id/27455683/

[*~1Best~*]

The Federal Open Market Committee decided today to lower its target for the federal funds rate 50 basis points to 1 percent.

The pace of economic activity appears to have slowed markedly, owing importantly to a decline in consumer expenditures. Business equipment spending and industrial production have weakened in recent months, and slowing economic activity in many foreign economies is damping the prospects for U.S. exports. Moreover, the intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit.

In light of the declines in the prices of energy and other commodities and the weaker prospects for economic activity, the Committee expects inflation to moderate in coming quarters to levels consistent with price stability.

Recent policy actions, including today’s rate reduction, coordinated interest rate cuts by central banks, extraordinary liquidity measures, and official steps to strengthen financial systems, should help over time to improve credit conditions and promote a return to moderate economic growth. Nevertheless, downside risks to growth remain. The Committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Elizabeth A. Duke; Richard W. Fisher; Donald L. Kohn; Randall S. Kroszner; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh.

In a related action, the Board of Governors unanimously approved a 50-basis-point decrease in the discount rate to 1-1/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Cleveland, and San Francisco.

[*~1Best~*]

NO BUBBLE, this is the chance we bust all bubbles. We had decades of big bubbles which we are now working off the excess. Due to the globalism, American standard of living was dwindling for decades ever since the American saving was in downtrend since 1970s. Even though we are seeing financial market melt down in 2008, US wealth was in down trend for decades when we consider personal savings level, net asset value and US national debt.

We are not living in the same economic condition as in 1970s when American saving was positive and when US trade deficit was low. Therefore, a comparison between 1970s and 2008 is illogical as surrounding circumstance is quite different.

Our economic condition is much like the Japanese in 1990, and since then, they have regenerated themselves financially and spiritually, i.e. Japanese spirit as a nation. We are not ready yet. American spirit is NOT regenerated, NOT EVEN CLOSE, far from it.

[*~1Best~*]

N.Y. Attorney General asks banks about bonuses
By Alistair Barr, MarketWatch
Last update: 4:12 p.m. EDT Oct. 29, 2008

SAN FRANCISCO (MarketWatch) -- New York Attorney General Andrew Cuomo has asked nine of the largest U.S. banks for information about the bonuses they plan to pay.
Cuomo sent a letter requesting the information to the nine banks that initially agreed to get an investment from the Treasury Department earlier this month.

Cuomo's request was focused on the boards of directors of the banks. He's looking for "detailed information regarding the bonus pool allocations," of the companies, according to a statement.
Cuomo is also asking the banks how they will protect taxpayer funds.

[*~1Best~*]

No CONFIDENCE in the people as many have fallen by the deception as well as leaders. Obviously we are living in age filled with greed and power.

____________

http://tinyurl.com/6pwkll

Trust, yet verify
Commentary: Eight decades after great crash, confidence still the issue

By David Andelman, World Policy Journal
Last update: 1:59 p.m. EDT Oct. 28, 2008
(David A. Andelman is editor of the World Policy Journal. The opinions expressed are his own.)
NEW YORK (MarketWatch) -- On


Black Thursday, Oct. 24, 1929, Richard Whitney, chief floor broker for J. Pierpont Morgan, strode onto the trading floor of the New York Stock Exchange, where he would later serve as president, headed to the post where United States Steel was trading -- which, like virtually every stock on the exchange, was in all but total freefall. He proclaimed in a stentorian voice: "I bid 205 for 10,000 steel."
A gasp spread across the trading floor, especially as Whitney made the rounds of other posts, spreading the largesse -- AT&T (T
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GE) -- a total of $130 million ($1.6 billion today) raised from a private pool of bankers who'd gathered in Morgan's offices after the crash that followed the opening bell.

Trust is the foundation on which the global economic system is based. I'm not persuaded that we've come very far in that respect since 1929.


For a moment, the market stabilized. The Dow Jones Industrial Average (INDU
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INDU) , which had plunged to 272 from 381, rebounded to close at 299. Still, it was just a brief pause. By the next Tuesday -- known as Black Tuesday and regarded as the real day of the 1929 crash -- the Dow was back down to 230, bottoming at 41.22 on July 8, 1932. It was still in double digits when World War II began nearly a decade later. It took us nearly 22 years -- to Sept. 5, 1951 -- to return to the very 272 where the Dow had plunged on Black Thursday.

Much, of course, is different now -- far different, from that catastrophic moment. Black Thursday itself took place, after all, in those long ago days before market circuit breakers, before big government bailouts. Richard Whitney's action back then was a dramatic gesture. And it worked ... for a nanosecond.
It failed to work, I would contend, because of the lack of a simple, yet fundamental commodity -- trust. Alas, that's the same commodity that seems to be so lacking today.

By the time Black Thursday rolled around, America -- indeed much of the world -- had lost trust in the system, its mechanisms and especially its players. In 1928, 491 U.S. banks had already failed. In 1929, another 642 closed their doors. By the time the banking system began to stabilize, some 9,000 banks had gone bust, wiping out the life savings of millions of Americans.
Runs on these banks, and the lack of a federal deposit insurance system, had evaporated depositors' trust in the system. Without trust that their deposits would be safe and their jobs secure, people stopped spending. Layoffs multiplied as companies found fewer customers to buy their products here. And worse was in store.

The same crisis was spreading across the globe. Countries, like banks, began pulling into protective shells. Rather than seek cross-border cooperation that might help companies find customers abroad, governments began to erect ever higher and more protective barriers, like the catastrophic Smoot-Hawley Tariff. Signed into law June 17, 1930, it only intensified misery around the globe as America's trading partners retaliated. America's exports and imports plunged by more than half.

Trust is the foundation on which the global economic system is based. I'm not persuaded that we've come very far in that respect since then. What's different? This time, the government jumped in at the outset. Before a host of banks could fail, precipitating a cascading run on the remaining, solvent institutions, governments in the U.S., Europe and Asia stepped up with big bailouts. Still, we can't see or feel the bailouts -- not yet, at least. So for the moment we behave as though they don't exist. Trying to buy a house? Well, it is still difficult, if not impossible, to get a mortgage.

At the same time, companies have begun contracting, rather than expanding. A friend who is a senior partner in a large, multi-national law firm tells me that not only has merger activity dried up in its offices around the world from London to Moscow, but capital finance as well -- a critical lubricant of the international financial system.

With companies unable or unwilling to raise new funds to expand, with little or no confidence there will be customers there if they do grow and create jobs, then we are indeed in for a long freeze.

Still, other elements of the equation of trust could help bail us out. Certainly, we've become a cynical bunch -- "show, don't tell" is the watchword today. Show us there's liquidity in the system, don't tell us. Show us there are bargains in the stock market, don't tell us. Today, we are also far better, and more instantly, informed than any of our forebears were three-quarters of a century ago.

While better, quicker information means that misery can spread more quickly around the globe, it may also mean that relief could spread more quickly as well

Cycles may well turn out to be sharper, yet shorter, then before. As we monitor daily, weekly, monthly and quarterly the profits and prospects of our corporations, our job losses (and gains), our shopping habits and patterns, rebuilding the trust that we lost so rapidly in the age of Google (GOOG
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GOOG) may also be easier and faster -- more global as well -- than ever before.
It may also be the only real hope we have.

[*~1Best~*]

FDIC Working on Program To Guarantee Home Loans
REAL ESTATE, ECONOMY, HOUSING, FEDERAL HOUSING ENTERPRISE OVERSIGHT, FINANCE, MORTGAGE
Reuters
| 23 Oct 2008 | 11:26 AM ET

U.S. banking regulators are working closely with the Bush administration to create a loan guarantee program that would serve as an incentive for servicers to modify home loans, the chairman of the Federal Deposit Insurance Corp said on Thursday.

Sheila Bair said the $700 billion financial rescue plan passed earlier this month gives the U.S. Treasury the power to use loan guarantees and credit enhancements to facilitate loan modifications and prevent avoidable foreclosures.

"Specifically, the government could establish standards for loan modifications and provide guarantees for loans meeting those standards," Bair said in prepared remarks to be delivered before the Senate Banking Committee. "By doing so, unaffordable loans could be converted into loans that are sustainable over the long term."

Bair did not immediately give an estimate for how large such a loan guarantee program could be, but said the bailout legislation provides "authority that could hold significant promise for future loan modifications."

"The FDIC is working closely and creatively with Treasury to realize the potential benefits of this authority," Bair said.

Bair also said the bulk of the U.S. banking industry is healthy and well-capitalized, but that FDIC is "prepared to do whatever it takes" to preserve confidence in the financial system.

The plans already announced under the bailout legislation should give banks the confidence to resume normal lending, Bair said.

The Treasury in recent days has outlined a plan to directly inject $250 billion of capital into U.S. banks in exchange for preferred shares.

Nine of the largest U.S. banks were essentially arm-twisted into signing on for the first $125 billion in capital infusions.

The FDIC has also enacted a temporary liquidity program that expands deposit insurance to cover all transaction deposit accounts.

It also provides a guarantee to banks' new unsecured senior debt.

But Bair said more needs to be done to address the root problem of home foreclosures.

"Minimizing foreclosures is important to the broader effort to stabilize global financial markets and the U.S. economy," Bair said.
Copyright 2008 Reuters. Click for restrictions.

URL: http://www.cnbc.com/id/27338739/

[*~1Best~*]

Greenspan excuse is unconscionable after executing his long term goals to ruin Americans' wealth as we can see the results by examining where the Americans and US wealth stands today after his decades of reign as the Fed chairman.

His long term goal of mishandling is obviously intended, as the results show how many American wealth and US has been stolen by the big power. We can be sure of the massive wealth transfer which can be seen the big fund increases in trillions.

May God have Mercy for He knows all deceptive and evil greed intent even though we can not prove it because of highly intellectually preventive criminal actions to steal massive amount from United States and Americans. Only God Himself has greater power than the big greed who has made trillions using deception. For him, United States was not too big to steal massive trillions with his long term plans.

May God have Mercy and Grace for United States as many sheepsters are misled by evil greed power.

__________________________________________________________________________________________

Greenspan: I Was 'Partially' Wrong On Credit Crisis
Reuters
| 23 Oct 2008 | 11:51 AM ET

Former Federal Reserve Chairman Alan Greenspan told Congress on Thursday he is "shocked" at the breakdown in U.S. credit markets and said he was "partially" wrong to resist regulation of some securities.

Despite concerns he had in 2005 that risks were being underestimated by investors, "this crisis, however, has turned out to be much broader than anything I could have imagined," Greenspan said to the House of Representatives Committee on Oversight and Government Reform.

"Those of us who have looked to the self-interest of lending institutions to protect shareholder's equity (myself especially) are in a state of shocked disbelief," said Greenspan, who stepped down from the Fed in 2006.

Banks and other financial institutions need public support, such as the recently approved $700 billion bailout package, to avoid a serious reduction in credit, he said.

While Greenspan was once hailed as one of the most accomplished central bankers in U.S. history, the low interest rates during his final Fed years have been blamed for fueling the housing bubble and eventual crash that touched off the current financial crisis.

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The former Fed chair said stabilization of U.S. housing markets—a necessary precondition for the economy to heal—is "many months in the future." He said he expected the unemployment rate to jump.

At the heart of the breakdown of credit markets was the securitization system that stimulated appetite for loans made to borrowers with spotty credit histories, Greenspan said.

"Without the excess demand from securitizers, subprime mortgage originations (undeniably the original source of crisis) would have been far smaller and defaults accordingly far fewer," he said.

"The consequent surge in global demand for U.S. subprime securities by banks, hedge and pension funds supported by unrealistically positive rating designations by credit agencies was, in my judgment, the core of the problem," he added.

Former Treasury Secretary John Snow agreed that risk had been under-priced on a global basis.

He said risks in mortgage markets were masked in part by accounting irregularities at Fannie Mae and Freddie Mac.

"A critical lack of transparency in secondary markets left policy-makers and regulators unable to discern the true nature and extent of the systemic risk that continued to build," he told the panel.

Greenspan urged that securitizers be required to retain "a meaningful part" of securities they issued. He said that regulatory reform will be necessary in the areas of fraud, settlement, and securitization to reestablish financial stability.

He also conceded he was "partially wrong" about his belief that certain derivatives, such as credit default swaps, did not need to be regulated.

Lawmakers, with one eye on a general election Nov. 4, lined up on both ideological sides of the debate.

Democrats assailed gaps in rules and oversight while Republicans faulted government-sponsored mortgage finance enterprises Fannie Mae and Freddie Mac for contributing to credit market strains.

"For too long, the prevailing attitude in Washington has been that the market always knows best," Committee Chairman Henry Waxman, a California Democrat said. "The Federal Reserve had the authority to stop the irresponsible lending practices...But its long-time chairman, Alan Greenspan, rejected pleas that he intervene."

Republicans countered that regulators were unable to avert disaster because of the extended network of financial oversight agencies and lawmakers' failure to rein in the powerful mortgage agencies, which are congressionally chartered.

"It wasn't deregulation that allowed this crisis," Rep. Tom Davis, a Virginia Republican said. "It was the mish-mash of regulations and regulators, each with too narrow a view of increasingly integrated national and global markets."

Republicans circulated an Oct. 20 letter asking for a government investigation of alleged fraud and mismanagement at Fannie Mae and Freddie Mac, which the government took over in September to restore to financial health.
Copyright 2008 Reuters. Click for restrictions.

URL: http://www.cnbc.com/id/27337369/

[*~1Best~*]

Greenspan is the author of ruining American Wealth during his reign with long term goal to wipe out American Wealth; so, what is it good to listen to his testimony which is nothing but unconscionable excuses for his actions. http://www.cnbc.com/id/27337369

The evil greed work has spread over global, and the massive wealth stealing from many around the world would be in trillions.

We could validate the reality of his long term scheme since 1987 by checking on his wealth and those who associated with him as we can tell the reality of the wealth steal from US and Americans. His alleged swiss account and his alliances' will validate the facts. Ultimately, evil greed works will be judged by God Almighty even if we can't do anything about it because of its oppressive power and scheme.

May God have Mercy and Grace

[*~1Best~*]

Greenspan era was a start of the American wealth downfall than ever before, and now we are seeing the finale of the long term effect of the Greenspan's blood work against America.

Literally, Greenspan would have transferred trillions of American wealth to the big fund dynasty.

The repeal of Glass-Steagall Act in connection with the long term plan of how to steal American Wealth - a good movie theme to see it more realistically than theoretically.

Green evil can deceive many, but can not deceive God Almighty who is the Ultimate Judge in the end.

May God have Mercy!


_________________________________________________________________

Greenspan Trillions after ~ The Satanic Bible was written by Anton LaVey in 1969. It is a collection of essays, observations and basic Satanic rituals, and outlines LaVey's Satanic ideology. The author claims the influence of Ragnar Redbeard and Ayn Rand among others.

The book contains the core principles of Satanism and is considered the foundation of the philosophy and dogma that constitute Satanism. LaVeyan Satanists maintain that The Satanic Bible may not be subject to interpretation or revision, and that no rule or principle contradictory to what is written in The Satanic Bible may be considered applicable to Satanism

http://en.wikipedia.org/wiki/Satanic_Bible

_________________________________________________________________


Housing Bailout Passed in July Making Little Progress

HOUSING, MORTGAGES, BANKS,
Posted By: Kenneth Stier | Features Writer
CNBC.com
| 22 Oct 2008 | 02:41 PM ET

Remember the housing bailout that Congress passed in July?

Called Hope for Homeowners, the $300 billion program has yet to get off the ground. Thousands of desperate homeowners who have sought help are being told that details haven't been worked out yet. And critics are already calling it too little, too late.

Perhaps for that reason, there is now talk in Congress of doing another housing rescue plan.

Hope for Homeowners, which officially opened its doors Oct 1. at the Federal Housing Administration, could avoid 400,000 foreclosures over the next three years, according to the Congressional Budget Office.

But several million foreclosures are expected during that time, and critics say there are still major hindrances for the new program to work at all.

The program aims to help borrowers who are threatened with losing their homes gain new government-guaranteed 30-year fixed-rate mortgages.

It requires lenders be willing to substitute existing mortgages for new ones written to 90 percent of the new appraised value of the homes—in effect making lenders put up 10 percent equity—besides taking the write-down.

“This program—just like everything else the government has tried so far—is too little, too late,” says Kathleen Day, a spokesperson for Center of Responsible Lending, a nonpartisan research and policy organization, which projects there will be 2.2 million foreclosures from now to the end of 2009. "It will just not have the impact that is needed."

That also seems the view from the front lines of the worst housing crisis since the Great Depression.

Chris Rines, executive vice president of Citizens Home Loans, a mortgage bank and brokerage in Dayton, Ohio, says banks and private investors—who put up the money for mortgages—will balk at underwriting new mortgages for borrowers with credit scores under 580.

But these are the program’s intended beneficiaries; those falling behind in payments will have eroded credit scores, and some major underwriters are raising the new threshold to a score of 600 or more.

Nor will investors be willing to write down the existing mortgages, if payments are still current.

Under this program, if the home is now valued at $100,000, underwriters must be willing to write a new mortgage for $90,000.

He says this Catch-22 is the result of inadequate consultation between government and private investors, who will likely have to wait months longer to get critical program details before they can figure out if they can make money under the program.

But while this is being worked out, Rines’ office is being flooded with "desperate calls for help" from homeowners—at least 150 a week since his company was posted on the FHA website. But he has little to offer them.

“It’s frustrating for us that we got to tell these people that unfortunately at this moment there just isn’t enough information," he says. "And it is kind of hard for them to understand, especially when they have sheriff’s notice on their door and they have kids. You know, it’s tough.”

Under a similar FHA program also aimed at avoiding foreclosures, FHASecure, launched a year ago, Rines managed to complete one loan – just last week – after trying with 25 different other loans.

He said it took six months after FHASecure was launched before there were sufficient details for private investors to seriously considering participating and Rines said he expected a similar timeline.

That’s not far from others’ expectations. “Our doors are open but we are probably still in the vestibule,” conceded Bill Glavin, special assistant to the FHA Commissioner, who said it would be at least another 45 days – “if then” - before the first new mortgages are written.

Industry groups say they welcome the program as “another tool” to avoid foreclosures, which the industry contends entails more losses for investors than modest write-downs.

But John Courson, chief operating officer of the Mortgage Bankers Association, said he considered the new program “will be used after all the other loss mitigation or forbearance opportunities have been exhausted."

“It has the potential to have a significant impact,” said Larry Gilmore, deputy director of Hope Now Alliance, a private sector initiative among investors, servicers, and lenders to avoid foreclosures.

It requires both borrower and lender to “put a piece of flesh on the table,” according to Rod Alba, senior counsel at the American Bankers Association.

Despite the hit to lenders, Alba says his members are “very encouraged” to participate but are still analyzing whether the program makes sense for them.

Glavin admitted that current industry participation—just 80 lenders have signed up so far—is not yet at “meaningful numbers” but expressed confidence this will rise. The government will begin offering training for the industry starting next month, he added.

Borrowers who are able to stay in their homes as a result of this program will forfeit at least 50 percent of future home value appreciation to the government, which seem to be tougher terms than Uncle Sam has demanded from financial institutions it has bailed out.

Another obstacle is the potential spoiler role that holders of second liens could have if they opt to move to foreclosures, rather than accept 9-12 percent of any future appreciation (from Uncle Sam's share) that the government is currently offering.

Under a provision in the recent bailout package, these second lien investors could possibly get this money up front rather than having to wait for a sale, Glavin explained.

But there are broader problems with this and other initiatives currently underway to stem foreclosures, which Day argues dooms all these efforts.

“Anything that is voluntary is not going to work,” argues Day, who says there will have to be mandatory mass loan modification such as Sheila Bair, head of the Federal Deposit Insurance Corporation (FDIC) has recently suggested, and is trying to do with borrowers of IndyMac, the bank that the government recently took over.

Industry officials admit they do not have the manpower to quickly handle the tidal wave of loans that need to be renegotiated.

Alba says there is increasing talk about significant changes afoot, including possibly allowing bankruptcy judges to alter primary residential mortgages, as they currently can for vacation homes and commercial property, a change Senator Chris Dodd now favors.

Rines says he is also convinced the government will have to step in to buy threatened mortgages outright or jointly underwriting new mortgages with private investors.

Hope Now says they have helped avoid 2.3 million foreclosures during the past year, but Day says this vastly overstates the real number of avoided foreclosures, which is part of the industry's effort to forestall tougher action from Congress.
© 2008 CNBC.com

URL: http://www.cnbc.com/id/27297104/

[*~1Best~*]

$BKX – Bank Index

[*~1Best~*]

After Dow's loss, Apple earnings delight

Apple profits crush estimates; Yahoo will cut 10% of its work force. But the Dow falls 232 points on weak earnings overall and profit-taking. Caterpillar and DuPont miss Street forecasts. Kirk Kerkorian sells a big chunk of his Ford stake.
By Charley Blaine and Elizabeth Strott

Stocks tumbled today because investors didn't care for most of the corporate earnings they saw.

But they liked Apple's (AAPL, news, msgs) quarterly report and sent the shares nearly 15% higher in after-hours trading.

Apple's numbers were so good that the futures trading suggests the U.S. stock market will open higher on Wednesday, with the Dow starting with a gain of some 70 points.

In addition, Yahoo shares were higher after it reported better-than-expected quarterly profits and said it would cut 10% of its work force by year-end.

Apple's and Yahoo's earnings came out after a day that saw the Dow Jones industrials fall 232 points, or 2.5%, to 9,034. The Standard & Poor's 500 Index was was down 30 points, or 3.1%, to 955, and the Nasdaq Composite Index was off 73 points, or 4.1%, to 1,697.

Much of the Nasdaq's loss was due to weak tech shares, which were driven lower by a weak earnings report from Texas Instruments (TXN, news, msgs) on Monday and worry about, yes, Apple. Apple was down 7.1% to $91.89 in regular trading -- and soared 13% to $103.32 by 6 p.m. in after-hours trading.

There were continuing indications that the credit markets was starting to thaw a bit. The Federal Reserve said today it would provide financing to shore up money market mutual funds, which were roiled when Lehman Bros. failed.

Despite that good news, the market was weighed down by energy stocks, which fell back after leading the Dow to a 413-point gain on Monday. Crude was the problem, falling 4.5% to $70.89 from Monday.

Result: ExxonMobil (XOM, news, msgs) fell 4.7% to 471.50; Chevron (CVX, news, msgs) was off 4%. Together, they subtracted 57 points from the Dow. Anadarko Petroleum (APC, news, msgs) dropped 6.9% to $34.84.
Yahoo, Apple beat estimates
Apple, down 7.1% to $91.49, clobbered Wall Street estimates in its fiscal-fourth quarter.

Despite a cautious first-quarter estimate -- even for Apple, which has always been very conservative on guidance -- shares were rising after hours. At 7:45 p.m. ET, the stock was at $104.96, up $13.47, or 14.7%, from the regular close. That's still down 47.5% from its record high of $199.83 on Dec. 28.The company earned $1.26 a share, up from $1.01 a year ago and ahead of the Wall Street forecast of $1.11 a share. Revenue was $11.7 billion, up 29% from a year ago. Wall Street was expecting $8.04 billion.

The company sold 2.6 million Macintosh computers in the quarter, up 21% from a year ago. Mac revenue was up 38% from a year ago.

IPod music player sales were 11.1 million units, up 8% from a year, with revenue up only 3% to $1.66 billion.

Yahoo shares, down 6.1% to $12.07 in regular trading, jumped 7% to $12.91 after hours after announcing it would cut 10% of its work force. The company also reported 9 cents a share in third-quarter earnings, down from 11 cents a year ago but a penny ahead of estimates.

Net income was $151.3 million, down 64% from a year ago. Revenue was $1.3 billion after payments to partners were deducted, up 3% from a year ago. Wall Street had expected $1.37 billion.

Analyst Martin Pyykkonen of Wunderlich Securities said fourth-quarter guidance of $1.77 billion to $1.97 billion was disappointing because it showed little if any growth.
A disappointing market close
The Dow's weak close was a bit of a downer. The blue chips had been down as much as 261 points at 12:45 p.m. ET and then started a big rebound when crude oil bounced higher from its lows, giving energy stocks a boost.

Profit-taking was partly at work after the market's big rally on Monday, when the Dow gained 413 points. Many traders aren't confident to stay with a stock for more than a few days -- if that long -- and sell on any significant upticks.

Energy stocks had led the Dow to a 413-point gain on Monday. But after crossing into the black at 3 p.m. ET, late-day selling set in and the market tumbled again.

Crude oil, which had dropped under $70 a barrel early in the day, closed at $70.89, down 4.5% on the day. Energy shares trimmed early losses, then faded again.

The Select Sector SPDR-Energy (XLE, news, msgs) exchange-traded fund had been down as much as 6.6% early in the day, recovered substantially by 3:30 p.m. ET and then dropped back to $48.96, down 4.5% from Monday.

Copper flirted with $2 a pound, its lowest price since November 2005. Freeport-McMoRan Copper & Gold (FCX, news, msgs) was down 10.8% to $32.74 after reporting that third-quarter earnings fell a third from a year ago.

* Get free, real-time stock quotes on MSN Money

Twenty-five of the 30 Dow stocks were lower today, along with 428 S&P 500 stocks and 95 stocks in the Nasdaq-100 ($NDX.X) Index. The index, which tracks the largest Nasdaq stocks, was down 69 points, or 5.1%, to 1,283.

For those wondering if the market has stabilized, the answer remains maybe.

The S&P 500 has been trading 50 points above and below 950 for seven sessions, and it has not come close to falling below 840.42, its intraday low on Oct. 10.

Energy prices -- New York close Tues. Mon. Chg. Month chg. YTD chg.
Crude oil (NYMEX) (per barrel) $70.89 $74.25 -$3.36 -29.56% -26.14%
Heating oil (per gallon) $2.1771 $2.2099 -$0.0328 -23.94% -17.83%
Natural gas (per million BTU) $6.8440 $6.7410 $0.1030 -7.99% -8.54%
Unleaded gasoline (per gallon) $1.6919 $1.7201 -$0.0282 -31.91% -32.07%

Dow stocks post mixed results
Earnings season is now in high gear, and investors can use reports from four Dow companies to gauge how well they are faring through the economic slowdown.

Heavy-equipment maker Caterpillar (CAT, news, msgs) earned $1.39 per share in the third quarter, down slightly from the $1.40 per share it earned last year and slightly below the consensus estimate of $1.41 per share.

Revenue rose 13% to $12.98 billion.

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Caterpillar reiterated its 2008 earnings target of about $6 per share. Shares were down 5.1% to $38.83. The company said higher steel and freight costs offset record global sales. The company noted "recessionary conditions" in North America and forecast flat sales for 2009.

Chemical maker DuPont (DD, news, msgs) said it earned $367 million, or 40 cents per share -- a 30% decline from the $526 million, or 56 cents per share, last year.

Adjusted earnings came in at 56 cents per share, topping Wall Street's estimate of 52 cents. But the company lowered its full-year forecast to between $3.25 and $3.30 per share, down from a previous forecast of $3.45 to $3.55 per share, citing the weak economy and disruptions from hurricanes.

DuPont shares fell 8% to $33.28.

3M (MMM, news, msgs) managed to report an increase in profit, albeit a small one. The company earned $991 million, or $1.41 per share, a 3% increase from the $960 million, or $1.32 per share, it earned a year ago. Excluding items, 3M earned $1.42 per share, a nickel above the consensus estimate.

3M shares rose 4.4% to $60.04.American Express (AXP, news, msgs) late Monday reported better-than-expected quarterly earnings of $815 million, or 70 cents per share -- a 24% decline from the $1.07 billion, or 90 cents per share, a year earlier.

Earnings from continuing operations came in at 74 cents, down 20 cents from a year ago, but much higher than the consensus estimate of 59 cents per share.

"Cardmember spending is likely to remain soft. Loan growth will be restrained, in part because of the steps we are taking to reduce credit risks, and credit indicators are likely to reflect the continued downturn in the economy and throughout the housing sector," Chief Executive Officer Kenneth Chenault said in a statement.

The company set aside $1.37 billion to cover loan losses, a 51% increase from last year.

Credit card companies have been hit by delinquencies and defaults amid the financial market chaos, a slowdown in consumer spending and a rise in unemployment.

Amex shares rose 8.4% to $26.39; the gain was tops among the 30 Dow stocks.
Kerkorian cuts stake in Ford
Billionaire investor Kirk Kerkorian is getting out of Ford Motor (F, news, msgs). Kerkorian's investment company Tracinda has sold 7.3 million shares of the U.S. automaker, reducing its stake to 6% of the troubled company.

Tracinda said it may sell the rest of its Ford shares if market conditions dictate.

Ford stock was down 6.9% to $2.17.

* Top Stocks blog: He lost $700 million in four months

European stocks end mostly flat
European stocks were mixed after rising earlier on news that the French government would lend to six of the country's biggest banks. France's CAC 40 Index was up 0.8%, London's FTSE 100 Index ($GB:UKX) was down 1.2%, and the broader Dow Jones Stoxx 600 Index was down 0.6%.

The steps taken by governments around the world to tackle the financial crisis are starting to stabilize the banking system, if slowly, Standard & Poor's credit analyst Scott Bugie said in a statement late Monday.

Bugie said the moves "should help restore confidence in the world's banks, allowing investors and counterparties to begin assessing banks again on their business strengths."
Efforts to ease credit mess are working
There is growing evidence that the credit freeze is ending or at least easing.

The London Interbank Offered Rate -- the rate banks charge each other for short-term borrowing -- fell to 1.28%, below the government's target federal funds rate of 1.5% for the first time since Oct. 3, according to the British Bankers' Association. On Monday, it fell to 1.5% from 1.7%. Overnight lending rates are typically around the fed funds rate when markets are calm.

The three-month Libor fell to 3.83% this morning, from 4.06% Monday. It was at 4.42% Friday and 4.82% earlier last week.

The rate rose precipitously, locking up the credit markets, when banks panicked over fears of defaults and bankruptcies at other banks.

"Conditions are far from perfect, but (Monday's) improvement was substantial," Miller Tabak Chief Bond Strategist Tony Crescenzi wrote in a note to clients.

Another expert was a bit more cautious. "It likely will be a slow return to normalcy for credit markets," MKM Partners Chief Economist Michael Darda wrote in a note this morning, because "home prices probably have to get closer to a bottom."

Darda expects two to three more quarters of negative growth and then a weak recovery.

This morning, the Federal Reserve announced a new funding program to help further ease the short-term credit crunch by buying commercial paper from money market mutual funds.

"The short-term debt markets have been under considerable strain in recent weeks as money market mutual funds and other investors have had difficulty selling assets to satisfy redemption requests," the Fed said in a statement.
TI and Sun miss expectations
Texas Instruments late Monday reported a 26% drop in third-quarter net income, posting $563 million, or 43 cents per share, a penny shy of the consensus estimate.

The chip maker also said profit for the current quarter would be between $2.83 billion and $3.07 billion, short of Wall Street's estimate of $3.33 billion. "We see customers that are observing slowing demand from their marketplaces, and I think we have a number of customers that fear more reductions as they look at the overall economic environment, and I believe we have a number of people starting to guard against getting caught with inventory," CEO Rich Templeton said on an analyst conference call.

The stock was down 6.3% to $16.85; it had dropped nearly 12% after the open.

Things weren't looking any better at Sun Microsystems, which said late Monday that it would report a loss of between 25 cents and 35 cents per share in its fiscal first quarter, which ended Sept. 28.

Excluding charges, the loss will come out to between 2 cents and 12 cents per share, worse than analysts' expectations of a 1-cent loss. Revenue fell 32% to $2.95 billion.

Sun shares tumbled 17.5% to $4.77.

Andrew Rosenbaum contributed to this report.

[*~1Best~*]

Regional banks' results hurt by credit crisis
By Jonathan Stempel Jonathan Stempel Tue Oct 21, 4:42 pm ET

NEW YORK (Reuters) – The credit crisis weighed on results at six large U.S. regional banks located throughout the country, as they reported lower profits or continued losses on Tuesday.

Profits fell at U.S. Bancorp, which operates in the western two-thirds of the country, as well as at Southeast bank Regions Financial Corp and the mid-Atlantic's M&T Bank Corp.

Ohio's largest banks all suffered losses, with National City Corp posting its fifth straight quarterly deficit and Fifth Third Bancorp and KeyCorp their second straight. National City also set plans to cut 4,000 jobs, or 14 percent of its workforce, over three years.

All the banks more than doubled their reserves for loan losses compared with a year earlier, and net charge-offs also soared. Results echoed deteriorating credit at big rivals such as Bank of America Corp, Citigroup Inc, JPMorgan Chase & Co and Wells Fargo & Co.

"This is what happens in a recession, especially one driven by financials and the consumer," said Edward Hemmelgarn, president of Shaker Investments in Cleveland. "Everything always looks gloomiest as banks try to stay ahead of the curve." Nevertheless, he said capital at many banks "is actually in pretty good shape."

Tight credit conditions were one reason U.S. Treasury Secretary Henry Paulson plans to infuse $250 billion of capital into the nation's banks, as part of his $700 billion Troubled Asset Relief Program.

Regions plans to seek as much as $3.5 billion of capital from TARP, while KeyCorp will seek $1.1 billion to $3.3 billion. Other banks said they may also participate. New capital may also allow some lenders to make acquisitions.

"Changes with regard to capital availability and tax changes potentially makes a merger transaction financially more attractive," U.S. Bancorp Chief Financial Officer Andrew Cecere said in an interview. He said the bank plans to decide within a couple of weeks whether to raise a potential $2.2 billion to $6.6 billion from the program.

"The big picture is continued consumer weakness, which will probably deteriorate further, leading to more credit losses and capital-raising," said Bill Fitzpatrick, an analyst at Optique Capital Management Inc in Milwaukee, Wisconsin.

He said KeyCorp, National City and Regions in particular "could be prime beneficiaries of TARP from a capital side."

PROFITS FALL

Profit at U.S. Bancorp fell 47 percent to $576 million, or 32 cents per share.

The Minneapolis-based lender has fared better than most rivals in the credit crisis, and Chief Executive Richard Davis said it has had exceptional deposit inflows in October as nervous depositors flee weaker rivals. Yet the bank set aside more than three times as much as a year earlier for bad loans.

"We are not immune to the challenges of the current environment," Davis said.

Regions, a Birmingham, Alabama, lender, said profit fell 80 percent to $79.5 million, or 11 cents per share.

At Buffalo, New York-based M&T, whose largest investors include Warren Buffett's Berkshire Hathaway Inc, profit fell 54 percent to $91.2 million, or 82 cents per share.

OHIO BANKS POST LOSSES

The net loss at Cleveland-based National City was $729 million, compared with a $19 million loss a year earlier. Excluding a dividend tied to a $7 billion capital raising in April, the loss was 85 cents per share.

While the bank lost some deposits amid September market turmoil, it said core deposits have since stabilized, and increased in October. But Chief Executive Peter Raskind said in an interview the economic environment remains tough. "It probably gets worse before it gets better," he said.

Fifth Third, a Cincinnati-based lender, said its net loss including preferred stock dividends was $81 million, or 14 cents per share, compared with a profit of $325 million, or 61 cents, a year earlier.

KeyCorp, based in Cleveland, said its loss from continuing operations was $36 million, or 10 cents per share, versus a profit of $224 million, or 57 cents, a year earlier.

"We have experienced the most severe financial crisis any of us has known in our business lifetime," said Chief Executive Henry Meyer, a 35-year banking industry veteran.

Shares of U.S. Bancorp fell 92 cents, or 3 percent, to close at $30.20 on the New York Stock Exchange; Regions rose 65 cents, or 6.1 percent, to $11.29; M&T rose $2.74, or 3.4 percent, to $83.82; National City rose 7 cents, or 2.4 percent, to $2.99; Fifth Third rose 2 cents to $12.25, and KeyCorp rose $1.21, or 12.4 percent, to $10.95.

(Additional reporting by Juan Lagorio; editing by John Wallace and Matthew Lewis)

[*~1Best~*]

Fed May Tap $540 Billion To Help Out Money Funds
CREDIT CRISIS, FINANCIAL CRISIS, BERNANKE, FEDERAL RESERVE, CENTRAL BANKS, NORTH AMERICA, ECONOMY, RECESSION
CNBC staff and wire reports
| 21 Oct 2008 | 10:46 AM ET

The Federal Reserve could lend as much as $540 billion in a new facility aimed at restoring liquidity for money market mutual funds, senior Fed officials said.

The Fed announced earlier Tuesday that it was launching the new facility to buy certificates of deposit and commercial paper from money market mutual funds, which have been under pressure as skittish investors demand withdrawals.

Many companies rely on commercial paper for short-term funding needs to pay workers and buy supplies. The situation has led to an intense credit crunch for these companies.

The Fed is tapping its Depression-era emergency powers and creating a new facility to buy a vast array of commercial paper from the funds.

Five special purpose vehicles set up under the new facility would be authorized to fund up to $600 billion in assets, the officials told reporters. The Fed would provide senior financing up to 90 percent.

JPMorgan Chase is the sponsor and manager of the conduits, an official said.

For Investors
# Market Psychologist: What to Do Now
# Continue to Sell Into Rallies: Morgan's Roach
# The Next Bull Market
# S&P Up 25% in 'Quiet' Rally: Strategist
# Credit Spreads and Libor Data

"The short-term debt markets have been under considerable strain in recent weeks as money market mutual funds and other investors have had difficulty selling assets to satisfy redemption requests," the Fed explained.

"By facilitating the sales of money market instruments in the secondary market," the Fed added, the facility "should improve the liquidity position of money market investors, thus increasing their ability to meet any further redemption requests and their willingness to invest in money market instruments."

The New York Fed will provide senior secured funding to a series of special purpose vehicles to finance purchases of certificates of deposit and commercial paper from U.S. money market mutual funds and others, the central bank said.

Eligible assets include dollar-denominated CDs and commercial paper issued by highly rated financial institutions and having remaining maturities of 90 days or less.

Eligible investors include U.S. money market mutual funds but may over time include other U.S. money market investors, the Fed said.

By doing so, the Fed hopes to improve conditions so that banks and other financial institutions will be more inclined to lend to each other and to consumers and businesses.

Not everyone cheered the Fed's latest move.

"We are in a very bizarre market," said Brian Dolan, chief currency strategist for Forex.com. "This latest move by the Fed is a blow to the market's psychology. It means that money market funds are having difficulty meeting redemptions and investors are still putting their money in their mattresses."
© 2008 CNBC

URL: http://www.cnbc.com/id/27293938/

[*~1Best~*]

Fed aids money markets; Wall Street falls
By Patricia Zengerle Patricia Zengerle 1 hr 23 mins ago

WASHINGTON (Reuters) – The U.S. Federal Reserve and governments around the world loosened strained financial markets on Tuesday by pumping in more money and launching bank rescues, but poor corporate profits and recession fears drove down commodities and U.S. stocks.

The Fed unveiled Washington's latest program to help the money market industry, saying it could lend up to $540 billion to five "special purpose vehicles" set up to buy certificates of deposit and commercial paper from money market mutual funds, which reeled after too many investors tried to take out their money.

Treasury Secretary Henry Paulson said he is not opposed to the idea of a second fiscal stimulus program, another piece of evidence that the Bush administration may accept another wave of government spending to help the economy, following Fed Chairman Ben Bernanke's endorsement of a new plan on Monday.

Japan and France earlier extended more help to banks and the IMF prepared to intervene in trouble spots such as Pakistan, Ukraine and Iceland.

Interbank lending costs came down again, offering tentative signs of renewed confidence in the financial system, as weeks of bailouts and rescue plans appear to have cooled the worst crisis since the 1930s Great Depression.

Paulson also said Treasury is looking at purchases of whole mortgage loans and the credit freeze is beginning to melt.

Nonetheless, he warned there may be "a number of difficult months" ahead before conditions improve. "We have a resilient economy but it will take time," Paulson said in an interview with the Charlie Rose show on PBS.

In the latest sign of the huge impact the financial crisis is wreaking in emerging markets, the government of Argentina said it was planning to take control of private pension funds. Labor leaders and many lawmakers applauded the nationalization as a way to guarantee pensions in a time of market turmoil, but the surprise move sent Argentine stock and bond prices into freefall.

'PRIVATE INVESTORS WILL COME BACK IN'

Governments around the world have promised $3.3 trillion to guarantee bank deposits and bank-to-bank lending, and in many cases have taken stakes in struggling banks.

"With honesty on bank balance sheets and enough government bucks, private investors will come back in," said Lawrence J. White, professor of economics at New York University's Stern School of Business, who helped oversee the liquidation of savings and loan assets in the late 1980s and early 1990s.

Government investment should be structured to ensure the government earns a profit if and when the banks' shares rise, White added.

U.S. stocks, hit by continuing investor concerns about slipping corporate earnings, slid hard after rising briefly into positive territory. The Dow Jones Industrial Average closed down 2.5 percent, the broader S&P lost more than 3 percent, and the NASDAQ Composite Index dropped more than 4 percent.

The U.S. dollar raced to a year-and-a-half high against a basket of currencies as investors and companies continued to deleverage. The stronger dollar, in turn, sent gold and oil prices down nearly 4 percent.

Japanese stocks had closed 3.3 percent higher and European shares closed down 0.8 percent.

The International Monetary Fund stood ready to help Pakistan, which said it needed up to $15 billion to avert a balance of payments crisis.

Ukraine also said it was close to agreeing to measures to allow it to receive IMF aid. Iceland as well appeared close to a deal with the IMF.

In the United States, the economy continued to dominate the presidential campaign two weeks before the November 4 vote. Democrat Barack Obama, who extended his lead over Republican John McCain in the polls, convened a panel of economic advisers and accused McCain of fumbling his response to the financial crisis.

Canadian banks cut their prime lending rates in response to lower funding costs and the Bank of Canada's 25 basis point interest rate cut earlier in the day, giving customers a shot at lower rates on various loans.

France's banks won some respite from the ravages of the financial crisis through a 10.5 billion-euro ($13.9 billion) state cash injection.

However, the Bank of England said Britain's economy is probably entering its first recession in 16 years, and the outlook has not worsened as rapidly as it has in the past month for a very long time, BoE governor Mervyn King said.

"We are far from the end of the road back to stability, but the plan to recapitalize our banking system, both here and abroad, will, I believe, come to be seen as the moment in the banking crisis of the past year when we turned the corner," King said.

Sterling fell 2 percent after King's comments.

In Japan, Economics Minister Kaoru Yosano said the country's big banks could get public funds if needed, as the government considered recasting a law to speed the flow of finance to credit-starved small firms.

(Reporting by Reuters bureaus around the world; Editing by Gary Hill)

[*~1Best~*]

Market Psychology: President hell-tribulation on earth ~ re: Dorn: Prepare for the Revulsion Stage

Almighty Mr President/Paulson/Greenspan brought down hell-on-earth since 2000.

And the world hedge funds became rich taking wealth off of Americans' savings, home equities, and now debt.

The world big funds are whipping and eating Americans alive.

Americans are going through tribulations after tribulations ~~>> suffering great deal by the big world money eating US alive.


_______________________________________________________________

Dorn: Prepare for the Revulsion Stage
MARKETS, STOCKS, COMMODITIES, PSYCHOLOGY
Posted By: Janice Dorn |
| 14 Oct 2008 | 03:51 PM ET

We got the shock and awe rally Monday and many were celebrating that the worst was over. Behavioral traders saw this as the needed relief from markets stretched too much to the downside and an opportunity to sell all underperforming assets. Today, we hit technical resistance on the S&P and we are now in position to retest and possibly undercut the lows from last Thursday and Friday.

Panic and sheer terror on Friday were replaced by hope and jubilation on Monday. Now, we are likely to see a washout where just about everyone who has not sold will give up and sell. They will walk away from the markets and vow never to return again. This will be the complete revulsion stage. Only when this happens will the markets be in a position to begin to rebuild the technical damage. This will take time, and it now appears that the highs in the broad indices have been seen for many years to come.

The American public trusted that their financial advisors and those managing their money would take care of them. They are now on the hook for what is likely to be in excess of $1 trillion. People will have nightmares about the Great Crash of 2008 for years to come. They will lose trust in the entire financial system and in many of their advisors who allowed their accounts to lose somewhere between 25% and 50%. The small retail trader will leave the markets in disgust and distrust. They have seen the banking system and selected public companies saved by government intervention.

Meanwhile, the retirement accounts and life savings of many have been almost completely destroyed. Americans are not stupid. They know that the banks and their predatory lending practices (coupled with the greed of many who just had to get a piece of the housing bubble) are at the root of this crisis. They also see that many of said banks have now been bailed out by a new social order and that they—the people, their children and their children’s children—will pay for this through many years to come.
What are Other CNBC.com Guest Bloggers Saying ...

___________________________________

Janice Dorn, M.D., Ph.D., is a financial psychiatrist and chief global risk strategist for Ingenieux Wealth Management in Sydney, Australia. She also offer trading consulting and coaching services via her Web site, TheTradingDoctor.com.

URL: http://www.cnbc.com/id/27184545/

[*~1Best~*]

No more Wild Wild West Financial System ~ We need to abolish free financial market system if we are not going to have adequate RULES AND REGULATIONS.

It is like wild wild west, like going out to street at night where gangs rob people on the streets. And you can't find any police.


Our markets had wild wild west where many have been robbed.

WE NEED BETTER RULES AND REGULATIONS! No more Wild Wild West Financial System

[*~1Best~*]

Crescenzi: Big Signal in Swap Rate
STOCK MARKET, STOCKS, STRATEGY, INVESTMENTS, BONDS, SWAPS
Posted By: Tony Crescenzi |
| 14 Oct 2008 | 12:33 PM ET

The two-year swap spread, which measures the difference between two-year swap rates and two-year Treasuries, has plunged 24 basis points to 125 basis points today, its lowest level since September 19th and 40 basis points below the peak set on October 2nd.

The drop is important because it indicates that market participants are betting that credit spreads will narrow. As a refresher, swap rates gauge the interest rate that a debt obligor (or speculator) pays to swap out of a floating-rate obligation into a fixed-rate obligation. Debtors do this particularly when they are unsure about their funding costs, a concern expressed wildly of late. (Crescenzi talks about other credit market signs with Jim Bianco and Kevin Ferry. See video)

If swap rates appear to be trending lower, U.S. corporations might begin selling debt before credit spreads fall, by selling fixed-rate debt and entering into swap agreements to swap their fixed-rate obligation for a floating one. This would be good news for the economy given the paltry amount of corporate bond issuance that has occurred of late.

At 125 basis points, the 2-year swap spread is still elevated. For example, in contrast, the 10-year swap spread is trading at just 52.5 basis points today, a relatively normal level, even in prosperous times.

The contrast obviously reflects the time frame involved, with market participants betting that the credit crisis and its affects will pass in due course, well before the 10-year time frame, but not necessarily before 2 years. The 2-year swap rate therefore indicates that there remain significant concerns regarding the outlook for corporate cash flows, and this will probably be the case until the economic climate appears set to improve.

Check key spreads and Libor data here.

More: Click for Latest Economic coverage ...

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URL: http://www.cnbc.com/id/27181661/

[*~1Best~*]

How the Revised Bank Rescue Plan Will Work









How the Revised Bank Rescue Plan Will Work
CREDIT CRUNCH, FINANCIAL CRISIS, GLOBAL ECONOMY, IMF, PAULSON, BUSH, GROUP OF SEVEN, STOCK MARKETS, G7
Reuters
| 14 Oct 2008 | 11:35 AM ET

The U.S. government on Tuesday launched a plan to inject $250 billion into beleaguered U.S. banks and guarantee bank debt to beat back a financial crisis that threatens to swamp the economy.

Following are details of the U.S. Treasury Department's recapitalization plan and the Federal Deposit Insurance Corp.'s decision to guarantee 100 percent of banks' unsecured debt and non-interest bearing deposits.

TREASURY PLAN

—The Treasury will buy up to $250 billion in preferred stock in banks, thrifts, or other depository institutions, but not those controlled by a foreign bank or company.

—Government non-voting stakes in qualifying financial institutions, with stakes in each institution limited to the lesser of $25 billion or 3 percent of risk-weighted assets. It set a Nov. 14 deadline for banks to apply for government purchases.

—Nine large financial instituions have agreed to sell shares in the government. The Treasury would not disclose them, but sources familiar with the matter and media reports have identified them as Bank of America , Wells Fargo , Citigroup , JPMorgan Chase , Goldman Sachs , Morgan Stanley and Bank of New York , State Street and Merrill Lynch .

—The funds for the purchases will come from the $700 billion authorized by Congress under a financial bailout bill known as the Emergency Economic Stabilization Act. The rescue plan initially focused on purchases of bad assets from banks to allow them to room to resume lending.

—The government non-voting senior preferred shares may not be redeemed for three years and will pay dividends of 5 percent annually for the first five years and 9 percent thereafter until the institution repurchases them. The government senior preferred shares do not alter rights of existing senior preferred share holders.

—Participating banks will need the Treasury's approval to increase common stock dividends for three years under the plan.

—The Treasury will also receive warrants to purchase common stock in a participating bank at an aggregate market price of 15 percent of its senior preferred stock investment. The warrants will be exercisable for 10 years and the exercise price will be based on a 20-day trailing average of the institutions' common stock price on the date of the Treasury investment.

—Participating banks must comply with Treasury restrictions on executive compensation, which limit tax deductability of senior executive pay to $500,000. Banks also must ensure that incentive compensation does not encourage unnecessary and excessive risks that threaten the value of the institution. They require bonuses to be "clawed back" if earnings statments or gains are later proven to be materially inaccurate and prohibit "golden parachute" payments to senior executives.

—A number of these same executive pay restrictions apply to financial firms that sell more than $300 million of troubled mortgage related assets to the Treasury under the asset purchase plan.

FDIC GUARANTEE PLAN

—The Federal Deposit Insurance Corporation, the government agency which traditionally guarantees deposits at banks, will guarantee senior unsecured debt issued by U.S-regulated banks, thrifts and other depository institutions issued befor June 30, 2009, including promissory notes, commercial paper, inter-bank funding and any unsecured portion of secured debt. This must not exceed 125 percent of debt outstanding on Sept. 30, 2008.

—This debt would be full protected in the event that the issuing institution subsequently fails, or its holding company files for bankruptcy. Coverage would be limited until June 30, 2012, even if the debt's maturity exceeds that date.

—The FDIC will guarantee all funds in non-interest-bearing transaction deposit accounts held by FDIC-insured banks until Dec. 31, 2009. These are mainly payment processing accounts, such as payroll accounts used by businesses.

—Fees for these guarantees would not rely on taxpayer funding. They would be paid by participating banks taht would pay a 75 basis-point fee to protec ttheir new debt issues and a 10 basis-point surcharge for desposits not otherwise covered by the existing deposit insurance limit of $250,000. All FDIC-insured institutions will be covered under the program for the first 30 days without any costs. After this initial period, banks not wishing to continue their participation will have to opt out or be assessed for future guarantees.

SYSTEMICALLY SIGNIFICANT FAILING INSTITUTIONS

—The Treasury is developing a third program to prevent in "systemically significant" financial firms from failing on a case-by-case basis.

—Treasury is still developing details of that rescue plan that it says will "provide direct assistance to certain failing firms on terms negotiated on a case-by-case basis."

—The Treasury will issuing guidance on executive compensation for firms under this plan that is similar to the capital purchase plan, but this will define golden parachutes more strictly to prohibit any payments to departing senior executives.
Copyright 2008 Reuters. Click for restrictions.

URL: http://www.cnbc.com/id/27180064/

[*~1Best~*]

What The New Bailout Plan Will Do
PISANI, TRADER TALK, BLOG, CNBC, CNBC.COM, MARKETS, STOCKS, STOCK MARKET, STOCK MARKET NEWS, CNBC STOCK NEWS, CNBC MARKET NEWS, INFLATION, OIL PRICES
Posted By: Bob Pisani | Reporter
cnbc.com
| 14 Oct 2008 | 09:14 AM ET

Futures, already up overnight, moved up again after 8 am ET as details were presented about the latest government rescue effort.

All of the major European economies, and the U.S. now have a similar plan.

The US government will 1) take a $250 billion equity stake in the form of preferred shares which cannot be redeemed for three years, 2) guarantee bank-to-bank lending, and 3) remove deposit insurance levels for non-interest bearing accounts.

The $250 billion investment will include four banks (Citi, JP Morgan, Bank of America, Wells Fargo), 2 brokers (Goldman, Morgan Stanley), and 2 processing banks (Bank of New York, State Street), and other smaller banks.

The investment of preferred shares on an equal level to existing preferred shareholders preserves the investment of those shareholders. If the rescue plan succeeds, the shares can be sold for more than the government paid, which would make a profit for the government and shareholders.
US Details Revised Bank Rescue Package

The hope is that this will result in a decline in LIBOR rates and elimination of counterparty risk. Several LIBOR rates are lower, CDS rates are lower across the board, while commodities are higher. In addition, the Fed will begin funding purchases of commercial paper on October 27th.

What happened to all the toxic mortgages? They're still there.

Elsewhere:

1) Financials are notably higher: Citi up 15 percent, Morgan Stanley up 19 percent, Goldman Sachs, Credit Suisse and Deutsche Bank up 12 percent. Some regional banks are even higher: KeyCorp up 21 percent, Regions Financial up 20 percent. Citigroup upgraded most of their banks to a Buy.

2) Johnson and Johnson beat estimates and raised guidance for the remainder of the year

3) Diversified manufacturer Ingersoll Rand down 8 percent as they lowered guidance for the third quarter, saying the economic slowdown has been more significant than expected.

[*~1Best~*]

US Outlines New Initiatives To Unfreeze Credit Markets
CREDIT CRUNCH, FINANCIAL CRISIS, GLOBAL ECONOMY, IMF, PAULSON, BUSH, GROUP OF SEVEN, STOCK MARKETS, G7
CNBC staff and wire reports
| 14 Oct 2008 | 11:40 AM ET

The US government outlined three new initiatives to aid financial institutions amid a historic credit crunch that has frozen lending around the world.

The moves fundamentally change the nation's historic hands-off relationship between government and the private sector.
# How the Revised Plan Will Work

The latest plan calls for a recapitalization of banks, federal guarantees on new bank debt for three years and FDIC insurance for non-interest bearing accounts, mirroring measures taken by other members of the Group of Seven nations.

In a news conference Tuesday, Treasury Secretary Henry Paulson said government stakes in private businesses was objectionable, but there was little choice in the matter.

"We regret having to take these actions," Paulson said. " Today's actions are not what we ever wanted to do. B ut today's actions are what we must do to restore confidence to our financial system."

Under the plan, the US government would take $25 billion in preferred stock in Bank of America , Wells Fargo , Citigroup , JPMorgan Chase , Goldman Sachs , Morgan Stanley and Bank of New York , State Street and Merrill Lynch .

Paulson said the banks— described as "healthy institutions"—had agreed to accept government stakes to help protect the U.S. economy.

The $250 billion will come from a $700 billion financial bailout program that was originally approved by Congress to buy bad assets that were poisoning bank balance sheets, paralyzing lending and threatening many institutions with failure.

Financial firms that turn to the government under the program will have to accept limits on executive compensation, including forfeiting tax deductibility for compensation above $500,000 for top executives.

The preferred shares also will pay cumulative annual dividend rate of 5 percent for the first five years and 9 percent after that, the Treasury said.

Revised Rescue Plan at a Glance
# US Treasury will buy up to $250 billion in senior preferred, nonvoting shares in financial institutions.
# Maximum purchase will be $25 billion per institution.
# Nov 14 deadline for banks to participate in equity purchase program.
# Preferred shares to pay 5 percent a year for first 5 years, 9 percent after 5 years.
# Firms in program must adopt Treasury's standards on executive pay and corporate governance.
# Compensation for top execs won't be tax deductible above $500,000.

Click here for more details

The recapitalization plan is a a dramatic change in strategy, which was originally based on a auction plan to buy bad debt from banks, and reflects the decision of G7 members to coalesce around a British proposal at a series of meetings in Washington last weekend.

"This is certainly an admission that the TARP [auction] was taking too long." said Robert Brusca, chief economist at FAO Economics.

Britain's bank plan called for 37 billion pounds ($64 billion) of taxpayers' cash to recapitalize three major banks in a move that could make the government their main shareholder.

Paulson was joined at Tuesday's news conference by Federal Reserve Chairman Ben Bernanke and FDIC Chairwoman Sheila Bair.

Bernanke offered no details about the federal guarantees, instead underscoring the central bank's recent decision to offer a backstop for the commercial paper market. Bernanke said the facility would start Oct. 27.

Blair did offer details of the guarantee plan, what she called a temporary liquidity guarantee program. The first aspect will guarantee senior unsecured debt and expires at the end of June 2009. The second aspect is directed at guaranteeing deposits, covering such things as company payrolls. Participants will be required to pay fees after the first 30 days.

Earlier Tuesday, President Bush called the initiatives "unprecedented steps" as part of a "coordinated plan of action."

"Each of these new programs contains safeguards to protect the taxpayers," said Bush. "The government's role will be limited and temporary."

Though the bulk of the efforts are directed at financial institutions, Bush made sure to mention that the moves would also help retirement accounts, college savings and small business.

Market watchers applauded the measures, even though critics say the size of the recapitalization plan may be a bit small given the size of the industry and its astronomical amount of outstanding debt.

"The banking system is the heart of any market economy," said Mohammed El-Erian, Pico Co-CEO. "You need to stabilize it." He added the plan will help banks "be able to lend again."

Princeton University professor and Nobel Prize-winning economist Paul Krugman told CNBC that for the first time he felt policy was "getting some traction on the crisis." Still, he called for more steps, including aid to state and local governments, public spending and measures to get "people spending."

The US banking industry measures follows pledges of more than 1 trillion euros ($1.36 trillion) by the governments of Britain, Germany, France and other European countries to bolster their banks.

Japan's government also announced a series of steps on Tuesday that could include a law allowing it to inject public funds into regional banks.

Many countries have also moved to reassure savers by guaranteeing bank deposits, which prompted the US to drop its initial reluctance to the idea.

—Reuters contributed to this report.
© 2008 CNBC

URL: http://www.cnbc.com/id/27176573/

[*~1Best~*]

Krugman: Revised Rescue Plan 'Looks Much Better'
BAILOUT, ECONOMY
CNBC.com
| 14 Oct 2008 | 11:13 AM ET

Paul Krugman, Princeton University professor, New York Times op-ed columnist and winner of the 2008 Nobel Prize for Economics, had been very critical of Treasury Secretary Henry Paulson’s original bailout plan, saying it was distorted by ideology.

Today, however, Krugman told CNBC he thinks the new plan, which will inject $250 billion into U.S. banks, “looks much better.”

“In the last six days this thing has come together with a plan that really does address the critical problem of inadequate capital at the banks (and) addresses the need for guarantees to calm the markets down," said Krugman. "We don’t know this is going to work, I wish we were sure, but this is a much better. For the first time I’m starting to feel that policy is really getting some traction on the crisis.”

Krugman said the current financial crisis repudiates the financial-markets-are-always right principle.

“A certain amount of public intervention, oversight and—in crisis—partial takeover of the financial system is something you have to do," he said. "Leaving the financial system to work things out on its own was disastrous in the 1930s and brought us to the brink of disaster again now.”

“This is not a case for socialism, it’s a case for regulation, oversight and for government-led rescues when there’s an emergency," he added. "We’re not going to go back to Karl Marx, but we are going to rediscover some of the things Franklin Roosevelt learned 75 years ago.”

Even with the new bailout plan, Krugman thinks we're headed toward a "serious recession."

"Even before the financial markets went crazy four weeks ago…there was a lot of downward momentum in the economy, and this isn’t going to reverse that. This is just preventing that from getting much worse.”

“I think this is the right thing for the immediate financial crisis, but I would say let’s have aid to state and local governments, let’s have public spending, let’s have some expanded unemployment benefits, partly because people need it, partly to put cash in the hands of people who are likely to spend it.”
© 2008 CNBC.com

URL: http://www.cnbc.com/id/27180035/

[*~1Best~*]

U.S. Treasury Said to Invest in Nine Major U.S. Banks (Update2)

By Robert Schmidt and Peter Cook
More Photos/Details

Oct. 13 (Bloomberg) -- The Bush administration will announce a plan to rescue frozen credit markets that includes spending about half of a total of $250 billion for preferred shares of nine major banks, people briefed on the matter said.

The companies are Citigroup Inc., Wells Fargo & Co., JPMorgan Chase & Co., Bank of America Corp., Goldman Sachs Group Inc., Morgan Stanley, State Street Corp., and Bank of New York Mellon Corp., the people said. One of the people also said Merrill Lynch & Co. will receive an investment.

The injections represent a new approach for Treasury Secretary Henry Paulson's attempts to prevent a financial market meltdown from sending the U.S. economy into a prolonged recession. He's following similar interventions by European leaders and using broad powers Congress gave him earlier this month to save the country's banking system.

``They've decided they need to do something drastic and this is drastic,'' said Gerard Cassidy, a bank analyst at RBC Capital Markets in Portland, Maine.

None of banks getting government money was given a choice about it, said one of the people familiar with the plans. All of the banks involved will have to submit to compensation restrictions, said the person.

The government will also guarantee the banks' newly issued senior unsecured debt, making it easier for them to refinance their liabilities, the person said.

Allocating Money

The Treasury plans to spend $25 billion each for stakes in Citigroup and JPMorgan, people said. Another $25 billion will be divided between Bank of America and Merrill, which agreed last month to be acquired by Bank of America. Goldman and Morgan Stanley will each get $10 billion, while State Street and Bank of New York will get injections of about $3 billion each, people said.

Financial institutions are struggling to regain the confidence of investors, counterparties and clients after bad loans caused more than $635 billion of writedowns across the industry. Falling share prices have made it harder to raise equity while surging borrowing costs have made debt refinancing harder.

Paulson, Federal Reserve Chairman Ben S. Bernanke and FDIC Chairman Sheila Bair scheduled at 8:30 a.m. press conference tomorrow in Washington. Paulson's initiative follows an announcement in Europe that France, Germany, Spain, the Netherlands and Austria committed $1.8 trillion to guarantee bank loans and take stakes in lenders.

The press conference at Treasury will address ``a series of comprehensive actions to strengthen public confidence in our financial institutions and restore functioning of our credit markets,'' the department said in a e-mailed statement.

Chief executive officers of major U.S. banks met with Paulson to discuss the options for helping markets. Stocks in the U.S. earlier today rallied the most in seven decades, pushing the Standard & Poor's 500 Index up 11.6 percent.

To contact the reporter on this story: Robert Schmidt in Washington at [e-mail].
Last Updated: October 13, 2008 20:41 EDT

[*~1Best~*]

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[*~1Best~*]

US Government to Invest $250 Billion in Banks
FED, TREASURY, CREDIT CRUNCH, FINANCIAL CRISIS, GLOBAL ECONOMY, IMF, MERKEL, SARKOZY, BUSH, GROUP OF SEVEN
CNBC.com
| 13 Oct 2008 | 06:29 PM ET

The U.S. government plans to invest about $250 billion in possibly thousands of banks as part of a far-reaching effort to shore up the U.S. financial sector, and an announcement of the plans could come as soon as Tuesday, sources have told CNBC.

The planned equity investments are part of a U.S. Treasury, Federal Reserve and Federal Deposit Insurance Corp. program. As part of the deal, the FDIC will insure all non-interest paying bank deposits and new preferred debt issued by banks.

Treasury Secretary Henry Paulson met with top Wall Street bankers on Monday to nail down the plan for the government to buy shares in financial firms to restore confidence in rattled markets.

The evolving plan marks a quick about-face for Washington policy-makers, who until recent days had been focusing on building an apparatus to soak up bad assets from banks.

Meanwhile, the Wall Street Journal, citing people familiar with the situation, reported late Monday that the federal government plans to buy preferred equity stakes in nine top banks as part of its effort to battle the financial crisis.

The newspaper did not report how much would be invested in each institution, but said the move is designed to destigmatize government investment.

The overall push by the feds could provide faster relief to a paralyzed banking system and would put the United States more in line with Europe, where governments on Monday pledged billions of dollars to recapitalize banks or guarantee lending.

The blue chip Dow Jones industrial average soared 936 points in its biggest one-day gain ever as investors cheered the moves on both sides of the Atlantic. An announcement of a U.S. plan could come as early as Tuesday.

"There's still a cloud ... over banks, but hopefully this will be the first rays of sunshine," Wayne Abernathy, a policy expert at the American Bankers Association, said of the U.S. Treasury's latest efforts.

Shortly before the 3 p.m. EDT meeting, Goldman Sachs chief Lloyd Blankfield strolled into the U.S. Treasury building with a spiral notebook under one arm. Other Wall Street executives arrived around the same time.

The heads of Bank of America , Citigroup , JPMorgan Chase , Goldman Sachs , Morgan Stanley and New York Mellon were scheduled to attend.

U.S. Federal Reserve Chairman Ben Bernanke and New York Federal Reserve Bank President Timothy Geithner also participated.

The stepped-up effort eased investor angst that the worst financial crisis since the 1930s was going to push the economy through a deep and protracted recession. Last week, world stocks hit five-year lows as sentiment soured, with the Dow recording its worst weekly loss on record.

European Action Shuffles U.S. Plans

A Treasury official said the United States was moving forward on an action plan announced on Friday with other Group of Seven wealthy economies to "improve the availability of funding for our banks."

Britain, Germany, France, Italy and other European governments on Monday announced rescue packages totaling hundreds of billions of dollars aimed at unsticking locked-up global credit markets.

Early this month, the U.S. Congress gave the Treasury power to buy as much as $700 billion in bad debts to help banks scrub their balance sheets and return to normal lending.

Paulson had previously opposed the idea of Washington buying a stake in banks, which is also permitted under the new law, but officials said they are now retooling the aid package to provide a direct capital injection.

"It's hard to avoid the sense that Mr. Paulson's initial response was distorted by ideology. Remember, he works for an administration whose philosophy of government can be summed up as 'private good, public bad,'" economist Paul Krugman, who won the Nobel price for economics on Monday, wrote in the New York Times.

Key Democratic lawmakers backed the plan as a needed move to quell the crisis.

This "was not the original proposal but clearly there seems to be a consensus that is essentially what is necessary," said House of Representatives Majority Leader Steny Hoyer.

"The economists advise us (that this is) the most beneficial action that can be taken in the short term to stabilize the system," the Maryland Democrat said.
Five Money Mistakes Even Smart People Make

Speaking before a banking group, the head of the Treasury's $700 billion financial rescue program, Neel Kashkari, disclosed a few details about the plan officials were constructing.

"We are designing a standardized program to purchase equity in a broad array of financial institutions,'' Kashkari told a banking group.

"As with the other programs, the equity purchase program will be voluntary and designed with attractive terms to encourage participation from healthy institutions. It will also encourage firms to raise new private capital to complement public capital,'' he added.

- Reuters contributed to this report.
© 2008 CNBC.com

URL: http://www.cnbc.com/id/27163622/

[*~1Best~*]

U.K. reportedly poised to invest in banks
Move may prompt suspension of London trading, report says
By Rex Nutting & Sam Mamudi, MarketWatch
Last update: 12:46 p.m. EDT Oct. 12, 2008

NEW YORK (MarketWatch) -- The U.K. government is finalizing plans to invest billions of pounds in four of the country's largest banks, according to media reports.
The moves may see the government taking majority stakes in Royal Bank of Scotland Group (RBS
royal bk scotland group plc sp adr rep shs
News, chart, profile, more


RBS) and HBOS Plc (UK:HBOS: news, chart, profile) .
An announcement about the deals is aimed for 7 a.m. Monday, The Wall Street Journal reported on its Web site Sunday. The scale of the fundraising could lead to trading at the London stock market being suspended, reports said.

The U.K. is expected to invest 12 billion pounds ($20 billion) in RBS, 10 billion pounds in HBOS, 7 billion pounds in Lloyds TSB Group PLC (UK:LLOY: news, chart, profile) and 3 billion pounds in Barclays PLC (UK:BARC: news, chart, profile) , after receiving urgent requests from the banks for funding, according to the Sunday Telegraph.
Lloyds TSB said on Sept. 18 that it would merge with HBOS in a deal that would create the largest retail bank, mortgage lender and life insurance provider in the U.K.
The Sunday Times said that RBS will ask the government to underwrite a 15 billion pounds cash call.

The moves could see the U.K. government owning 70% of HBOS and 50% of RBS, said the Sunday Times. That would mean it could take board seats and control dividend payments at both companies, the newspaper said.

Recapitalizations would likely lead to discussions of executive departures, including that of Sir Fred Goodwin, chief executive officer of RBS, The Wall Street Journal said. It said there had been steps taken to identify a replacement for Goodwin. An RBS spokesperson declined comment.
Bank of England Governor Mervyn King told the banks to ask for more than they need, the Sunday Times said. The Treasury has increased the total amount available to banks to 75 billion pounds from the 50 billion pounds it had announced Wednesday.
"This is not an optional extra. It is imperative [other countries] get on with it. There is a very clear sense that governments need to act now," said U.K. Chancellor Alistair Darling. "This is a necessary step towards stabilization."
The recapitalizations are part of a broader effort announced earlier this week by the U.K. government to stabilize its banking system.

In addition to injecting tens of billions of pounds into the banks, the government said it will provide 250 billion pounds to guarantee bank debt maturing in up to 36 months.
A program run by the Bank of England that allows banks to exchange securities for government bills has also been doubled from 100 billion pounds to 200 billion pounds.

News of the U.K. recapitalizations came as global financial leaders met in Washington to endorse a plan put forward Friday by the Group of Seven to backstop the financial system with injections of public funds directly into banks and into bank deposit insurance. See full story.

The U.S. is working to unveil its bank recapitalization plans, Treasury Secretary Henry Paulson said Friday. See text of statement.

Germany was reportedly set to unveil a plan to shore up its own banks' capitalization. See full story.
Other nations, including France and Australia, were similarly reported to be rolling out emergency financial measures of their own.

[*~1Best~*]

A Wave of Mergers Could Hit Banking Sector
Posted By: Charlie Gasparino | On-Air Editor
CNBC.com
| 12 Oct 2008 | 01:24 PM ET

The continued turmoil in the financial markets could spark a wave of mergers among banks and remaining brokerage firms in the coming weeks, even as the federal government unveils a plan to make direct investments in banks to further bolster the financial health of the financial sector, according to Wall Street executives interviewed by CNBC.

The problem for the banking sector is that even as the stock markets fall to new lows, the all- important credit markets, where companies both large and small borrow billions of dollars a day to fund their operations, is locked and showing little signs of life because of bad real estate related debt and risky mortgages on the books of major banks and brokerage firms.

Congress recently passed a plan to spend $700 billion to buy these soured assets directly from the bank, and now has unveiled a plan to recapitalize struggling banks to unlock the credit markets and allow borrowing to begin. But the markets have yet to respond favorably to the governments efforts, causing senior executives at the major banks to weigh further consolidation of the banking sector.

Since the credit crunch began in early 2007, Bear Stearns, facing likely bankruptcy, sold itself to JP Morgan for $10 a share with the federal government agreeing to cover some of JP Morgan's losses on the soured real estate debt it inherited from Bear. Lehman Brothers without government help was forced to file for bankruptcy and its investment banking operations is now owned by Barclays. Goldman Sachs recently recast itself as a bank, and received a capital infusion from billionaire investor Warren Buffett.

Another of these struggling banks, Morgan Stanley also recast itself as a bank, giving it direct access to funding from the government and recently announced a deal in which Mitsubishi UFJ Financial of Japan would invest $9 billion into the firm, holding a 21% stake in one of the most venerable names in American finance that traces its roots to the House of Morgan. But the recent market turmoil has decimated shares of Morgan, and its market value has fallen to around $10 billion. People inside Morgan expect Mitsubishi to recast the deal since US banking laws prohibit a foreign bank from holding a majority stake in a US bank.

Also, people inside Morgan say the government might take a direct stake in the firm to further bolster its balance sheet.

On Saturday, a spokeswoman for Morgan said the firm has had no conversations with the government about an investment and there are no talks with Mitsubishi about changing the terms of the deal. She did not return telephone calls on Sunday to determine if the status of either issue had changed.

Meanwhile, many of the major financial firms from Morgan and Goldman to Citigroup , Credit Suisse , UBS and JP Morgan are closely weighing their futures.

A senior Wall Street executive with knowledge of each of the firms' thinking told CNBC that senior executives at these firms all concede that there could be a wave of mergers in the coming weeks among these firms as a way to bolster their balance sheets if the government's efforts to bolster the banking sector don't begin to unlock the credit markets.

"This will be a big week," said the executive, who spoke on the condition of anonymity. "From what I hear all these guys are talking because the credit markets aren't getting better."

At one of the most financially stable banks, JP Morgan, officials there are bracing for the government to ask if it will do what it had done with Bear: step in and buy one of the other remaining ailing institutions - possibly Morgan Stanley - in a move that would reunite the old House of Morgan. (The Depression-era banking law Glass-Steagall forced JP Morgan to separate its commercial and investment banking operations. That law has since been revoked.) But officials at JP Morgan are loathe to take over and integrate another financial house.

The bad debt on Bear's balance sheet, these people say, was even worse that the firm thought, causing JP Morgan to write down more losses than originally planned.

In addition, the Bear integration caused massive layoffs because both sides had similar operations.

If JP Morgan took over Morgan Stanley -- one of the world's premier investment banks -- it would still have to slash staff to make the merger work.

"It would be a bloodbath," said one JP Morgan executive.

A JP Morgan spokeswoman had no comment.
© 2008 CNBC.com

URL: http://www.cnbc.com/id/27149028/

[*~1Best~*]

~~~ $BKX ~~~ 48.84 reversed from 47 +/- double bottom formation






http://tinyurl.com/2rsyh4

[*~1Best~*]

Bernanke: Rate Cut Possible to Cure 'Historic' Slump

BEN BERNANKE, RATE CUT, FEDERAL RESERVE, FED, ECONOMY, RECESSION
Reuters
| 07 Oct 2008 | 01:36 PM ET

Federal Reserve Chairman Ben Bernanke Tuesday signaled a readiness to lower interest rates in a dramatic shift to support an economy battered by a financial crisis of "historic dimension."

Recent economic data and financial developments show that the outlook for growth has worsened and downside risks to growth have gained, Bernanke said in remarks to the National Association for Business Economics. The outlook for inflation, while still uncertain, has improved somewhat as oil and other commodity prices have eased, he said.

"In light of these developments, the Federal Reserve will need to consider whether the current stance of policy remains appropriate," Bernanke said.

In opening the door to rate cuts, Bernanke is departing from the view he and other Fed officials had expressed until recently that lower rates would likely have little effect in boosting economic activity while credit markets are frozen.

Bernanke said the economy is poised for subdued growth during the remainder of this year and into next year. Financial turmoil is likely to extend the weak period and increase risks to growth, he said.

"Continued efforts to stabilize the financial markets are essential," he said. "The Federal Reserve will continue to use the tools at its disposal to improve market functioning and liquidity," he added.
Copyright 2008 Reuters. Click for restrictions.

URL: http://www.cnbc.com/id/27070225/

[*~1Best~*]

~~ Industry Comparative Performances ~~ 1 yr

http://investorshub.advfn.com/boards/read_msg.aspx?message_id=32698641

[*~1Best~*]

ARMAGEDDON: UK Banks' Shares Plunge on Government Funds Talk

The evil greed super rich has stolen wealth from many around the world. Now they are the SUPER NEW WORLD MONEY POWER.

Paulson, Bush & Greenspan gangs robbed the world ~ now NEW WORLD SUPER POWER

New Super Power after decades of scheme ~ at least trillions from the decades economic and financial boom and bust scheme - tech bubble and housing bubble among other including oil price hype.

___________________________________________________

CNBC.com
| 07 Oct 2008 | 07:18 AM ET

Shares in three major UK banks -- thought to be well capitalized -- were hammered after a report that they might ask the government for funding reignited fears about how sound the banking system was.

Markets across Europe retreated into negative territory but later recovered some ground.

Australia cut rates by a full point, sparking hopes of a coordinated lowering of interest rates at world level, and European stocks advanced shyly.

Royal Bank of Scotland fell 30 percent, Barclays lost nearly 17 percent and Lloyds TSB nearly 20 percent after the BBC reported on its Web site that the three had asked Chancellor of the Exchequer Alistair Darling for taxpayers money.

They later recovered some of the lost ground and RBS was trading nearly 25 percent down in early afternoon, Lloyds was 8 percent down and Barclays was 4.4 percent lower.

A Barclays spokesman told Reuters the bank had "categorically not" requested any funds from the UK government.

"We have categorically not requested capital from the government," Barclays spokesman Alistair Smith said, declining to comment on whether the bank had been involved in talks with the government on a potential recapitalisation.

A Lloyds TSB spokeswoman told CNBC "we haven't got any comment" on the report, while RBS also refused to comment, according to Reuters.

The request was made at a meeting with Darling last night, which was also attended by Bank of England Governor Mervyn King and Adair Turner, chairman of the Financial Services Authority, the BBC said.

The three banks estimate that they may need around 15 billion pounds of new capital each, with 7.5 billion pounds paid up front and a further 7.5 billion guaranteed by the Treasury that would be delivered if it became necessary, the report said.

The UK Treasury declined to comment, but said it would do whatever was necessary to maintain stability.

"As the Chancellor (of the Exchequer Alistair Darling) said yesterday, we will do whatever it takes to maintain stability and support a well-functioning banking system," a spokesman said.

A spokesman for Prime Minister Gordon Brown's office said he would not speculate on possible policy options. Britain's banking regulator, the FSA, declined to comment.

"I think what this signals to me is that this isn't a situation where banks can muddle through. They're going to have to be recapitalised and they're going to be heavily dependent on government and the authorities for sources of funding," said Simon Pryke, head of global research at Newton Asset Management.

An industry source told Reuters the next round of talks will focus on what form of equity the government would receive in return for providing banks with any injection of taxpayer's money.

"That's what they will be working on over the next couple of days," the source said.

The cost of insuring the debt of the three banks fell sharply on the reports of a possible capital injection.

Five-year senior credit default swaps on RBS were about 30 basis points tighter at 270 basis points and about 20 basis points tighter at 230 basis points on Barclays, a trader said. That means investors have to pay 270,OOO and 230,000 euros to insure 10 million euros of the respective banks' debt against default.

"It's more of an equity story, as it look like shares will be diluted, while a capital increase is credit positive which explains how the CDS has reacted," a credit trader said.

Meanwhile European Union finance ministers are meeting in Brussels to discuss options on measures to restore confidence in the banking sector, but analysts say that the most likely outcome will be an agreement on guaranteeing private savings, without other major decisions.

Interbank money markets -- blocked for months by banks' refusal to lend to each other -- remained logjammed, with the cost of borrowing euros for three-month staying as high as 5.38 percent on Reuters system.

The FTSEurofirst 300 index fell 1.15 percent after falling 7.8 percent to four-year lows on Tuesday. MSCI main world equity index fell 0.5 percent, having lost more than 9 percent this month alone.

-- Reuters contributed to this report
© 2008 CNBC.com

URL: http://www.cnbc.com/id/27062494/

[*~1Best~*]

Big banks rubbery by melting them down.

Paulson hedge fund, greespan, paulson, rogers short fortune with Bush/Paulson creating financial crisis right before election.

FREEZE ~ NO LIQUIDITY ~ short fortune by melting down big banks

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Big Scam Freeze ~ Bank on this: bank failures will rise in next year


Big scam gangs created sudden freeze and cleaning out entire financial wealth from many.


~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Sunday October 5, 5:06 pm ET
By Michael Liedtke, AP Business Writer
Financial crisis likely to yield biggest banking shakeout since savings-and-loan meltdown

SAN FRANCISCO (AP) -- Here's a safe bet for uncertain times: A lot of banks won't survive the next year of upheaval despite the U.S. government's $700 billion plan to restore order to the financial industry.

The biggest question is how many will perish and how they will be put out of their misery -- in outright closures by regulators scrambling to preserve the dwindling deposit insurance fund or in fire sales made under government pressure.

Enfeebled by huge losses on risky home loans, the banking industry is now on the shakiest ground since the early 1990s, when more than 800 federally insured institutions failed in a three-year period. That was during the clean-up phase of a decade-long savings-and-loan meltdown that wound up costing U.S. taxpayers $170 billion to $205 billion, after adjusting for inflation.

The government's commitment to spend up to $700 billion buying bad debts from ailing banks is likely to save some institutions that would have otherwise died, but analysts doubt it will be enough to avert a major shakeout.

"It will help, but it's not going to be the saving grace" because a lot of banks are holding construction loans and other types of deteriorating assets that the government won't take off their books, predicted Stanford Financial analyst Jaret Seiberg. He expects more than 100 banks nationwide to fail next year.

The darkening clouds already have some depositors pondering a question that always seems to crop up in financial panics despite deposit insurance: Could it possibly make more sense to stash cash in a mattress than in a bank account?

"It sounds like a joke," said business owner Mauricoa Quintero as he recently paused outside a Wachovia Bank branch in Miami. "But it sounds safer than the turmoil out there right now."

Not as many banks are likely to fail as in the S&L crisis, largely because there are about 8,000 fewer today than there were in 1988.

But that doesn't necessarily mean the problems won't be as costly or as unnerving; banks are much larger than they were 20 years ago, thanks to laws passed in the 1990s.

"I don't see why things will be that much different this time," said Joseph Mason, an economist who worked for the U.S. Treasury Department in the 1990s and is now a finance professor at Louisiana State University. "We just had a big party where people and businesses overborrowed. We had a bubble and now we want to get back to normal. Is it going to be painless? No."

With more super-sized banks in business, fewer failures could still dump a big bill on the Federal Deposit Insurance Corp., the government agency that insures bank and S&L deposits. The FDIC's potential liability is rising under a provision of the bailout that increases the deposit insurance limit to $250,000 per account, up from $100,000.

Using statistics from the S&L crisis as a guide, Mason estimates total deposits in banks that fail during the current crisis at $1.1 trillion. After calculating gains from selling deposits and some of the assets of the failed banks, Mason estimates the clean-up this time will cost the FDIC $140 billion to $200 billion.

The FDIC's fund currently has about $45 billion -- a five-year low -- but the agency can make up for any shortfalls by borrowing from the U.S. Treasury and eventually repaying the money by raising the premiums that it charges the healthy banks and S&Ls.

Through the first nine months of the year, 13 banks and S&Ls have been taken over by the FDIC -- more than the previous five years combined.

The FDIC may be underestimating, or least not publicly acknowledging, the trouble ahead. As of June 30, the FDIC had 117 insured banks and S&Ls on its problem list. That represented about 1 percent of the nearly 8,500 institutions insured as of June 30. Entering 1991, about 10 percent of the industry -- 1,496 institutions -- was on the FDIC's endangered list.

Although the FDIC doesn't name the institutions it classifies as problems, this year's June 30 list didn't include two huge headaches -- Washington Mutual Bank and Wachovia. Combined, WaMu and Wachovia had more than $1 trillion in assets; the assets of the 117 institutions on the FDIC's watch list totaled $78 billion.

Late last month, WaMu became the largest bank failure in U.S. history, with $307 billion in assets, nearly five times more, on an inflation-adjusted basis, than the previous record collapse of Continental Illinois National Bank in 1984. The FDIC doesn't expect WaMu's demise to drain its fund because JP Morgan Chase & Co. agreed to buy the bank's deposits and most of the assets for $1.9 billion.

Regulators dodged another potential bullet by helping to negotiate the sale of Wachovia's banking operations to Citigroup Inc. in a complex deal that could still end up costing the FDIC, depending on the severity of future loan losses. On Friday, a battle of banking giants erupted when Wachovia struck a new deal with Wells Fargo & Co. without government help, and Citigroup demanded that it be called off.

The banking outlook looks even gloomier through the prism of Bauer Financial Inc., which has been relying on data filed with the FDIC to assess the health of federally insured institutions for the past 25 years.

Based on its analysis of the June 30 numbers, Bauer Financial concluded that 426 federally insured institutions are grappling with major problems -- about 5 percent of all banks and S&Ls.

About 15 percent of the banks on Bauer's cautionary list have more than $1 billion in assets. Not surprisingly, the troubles are concentrated among banks that were the most active in markets where free-flowing mortgages contributed to the rapid run-up in home prices that set the stage for the jarring comedown. By Bauer's reckoning, the largest numbers of troubled banks are in California, Florida, Georgia, Illinois and Minnesota.

"It's important for people to remember that not all these banks are going to fail, just because they are on this list," said Karen Dorway, Bauer Financial's president. "Many of them will recover."

James Barth, who was chief economist of the regulatory agency that oversaw the S&L industry in the 1980s, doubts things will get as bad as they did then.

"It's scary right now, but it's not as scary as a lot of people are making it out to be," said Barth, now a senior fellow at the Milken Institute, a think tank.

Mani Behimehr, a home designer living in Tustin, Calif., isn't feeling reassured after what happened to WaMu and Wachovia. After he heard the news that WaMu had been seized and sold to JP Morgan, he rushed out to withdraw about $150,000 in savings and opened a new account at Wachovia only to learn about its sale to Citigroup two days later.

"I thought this is the strongest economy in the world; nothing like that happens in this country," said Behimehr, 46, who is originally from Iran.

The tumult is creating expansion opportunities for healthy banks. Industry heavyweights like JP Morgan, Citigroup and Bank of America Corp. have already rolled the dice on major acquisitions of financially battered institutions in hopes of becoming more powerful than ever.

Smaller players like Clifton Savings Bank in New Jersey are bragging about their relatively clean balance sheets to lure depositors away from rivals that are wrestling with huge loan losses. The bank, with about $900 million in total assets, says just one of its 2,300 home loans is in foreclosure.

"There is going to be a flight to quality," predicted John Celentano Jr., Clifton Savings' chief executive. "People are going to start putting their money in places that were being run the way things are supposed to be run: the old-fashioned way."

AP Business Writer Dave Carpenter in Chicago and Associated Writers Rasha Madkour in Miami and Amy Taxin in Orange County, Calif. contributed to this story.

On The Net:

http://fdic.gov

[*~1Best~*]

Making millions/billions by shorting markets creating panic

It's amazing to see crazy talking heads on youtube and speaking nonsense.

Paulson gang, Roger gang... making millions /billions shorts

[*~1Best~*]

For Treasury Dept., Now Comes Hard Part of Bailout
TREASURY BAILOUT CREDIT CRISIS
The New York Times
| 04 Oct 2008 | 03:28 PM ET

It will be one of the world’s largest asset management firms with an impressive $700 billion war chest. Nothing short of the global economy depends on its success. And the Treasury Department has barely a month to get it up and running.

The bailout bill that President Bush quickly signed into law on Friday must do what financial experts have been unable to do for the last year — put a dollar value on mortgage-related assets that no one wants, move them off the books of ailing banks and unlock the frozen credit markets.

In signing the measure, Mr. Bush warned Americans not to expect instant results. “This will be done as expeditiously as possible, but it cannot be accomplished overnight. We’ll take the time necessary to design an effective program that achieves its objectives — and does not waste taxpayer dollars.”

Even after working feverishly over the last two weeks, the Treasury will not buy its first distressed asset from a bank for roughly six weeks, and almost certainly not until after the Nov. 4 elections.

Treasury officials do not plan to manage the mortgage assets on their own. Instead, they will outsource nearly all of the work to professionals, who will oversee huge portfolios of bonds and other securities for a management fee.

The Treasury is expected to name a senior official to supervise the program. For now, various working groups creating the program are reporting directly to Henry M. Paulson Jr., the Treasury secretary.

Mr. Paulson has recruited several former colleagues from Goldman Sachs to advise him, though administration officials took pains to say that they were not dominating the process, pointing to other Treasury employees who were playing major roles.

“We will move rapidly to implement the new authorities, but we will also move methodically,” Mr. Paulson said in a statement after the House passed the bill on Friday.

The government will hire only a bare-bones internal staff of about two dozen people with expertise in asset management, accounting and legal issues, according to administration officials, and will outsource the bulk of the program to 5 to 10 asset management firms.

Administration officials said they had not yet selected the list of firms to run auctions or manage the assets. During the last few weeks, the Treasury has informally consulted major firms — including BlackRock, the Pacific Investment Management Company and Legg Mason — but none have been given a mandate, they said.

The selected asset management firms will receive a chunk of the $250 billion that Congress is allowing the Treasury to spend in the first phase of the bailout. Those firms will receive fees that are likely to be lower than the industry standard of 1 percent of assets, or $1 for every $100 under management.

Administration officials said they would try to drive down fees with a competitive bidding process. But with $700 billion to disburse, the plan could still generate tens of billions of dollars in fees if the firms negotiate anywhere close to their standard fees.

The main mechanism for buying these assets will be reverse auctions, using the same principles that govern auctions of electricity or the wireless spectrum. In this case, the government will issue an offer to buy a class of assets — for example, subprime mortgage-backed securities — with the final price being determined by how many banks are willing to sell.

Using outside contractors on such an extensive scale raises a host of thorny questions, outside experts said. Among the most pressing is: How will the Treasury avoid conflicts of interest that fund managers will encounter as they work both for their own clients’ interests — which could pay higher fees — and the interests of taxpayers?

“With anyone short of the stature and honesty of a Paul Volcker running it, you need to worry a lot about conflicts of interest,” said Alan S. Blinder, a former vice chairman of the Federal Reserve, referring to its former head. “Unfortunately, there just aren’t many people with the expertise you need but without any possible conflicts.”

The Treasury officials said they were still writing a policy on conflicts of interest as well as guidelines on compensation.

As if the mechanics were not daunting enough, Treasury officials need to make wrenching decisions that will determine the bailout’s winners and losers. With so much money on the line, lobbyists for interest groups are already besieging the government to decide in their favor.

The prospect of pitching in during a national crisis has drawn unsolicited offers from prominent asset managers, like William H. Gross, the managing director of Pimco, who offered his services free.

In setting up the program, Mr. Paulson has relied on a cadre of former Goldman Sachs executives: Edward C. Forst, a former co-head of Goldman’s investment management business who is on leave from his job as executive vice president at Harvard; Kendrick R. Wilson III, formerly chairman of Goldman’s financial institutions groups; and Dan Jester, who was deputy chief financial officer at Goldman.

But administration officials said several other Treasury officials were playing crucial roles, including six assistant secretaries: Peter B. McCarthy, Phillip L. Swagel, Neel Kashkari, Kenneth E. Carfine, David G. Nason and Kevin I. Fromer, who led the Treasury’s negotiating team on Capitol Hill.

Mr. Forst is expected to soon return to Harvard, where he helps manage its endowment fund. And with a change in administrations looming, many of the people involved in organizing the program will not be around to manage it.

Still, the Treasury may not have trouble recruiting replacements, given the job losses that have plagued the finance industry.
# More on What's Ahead from The New York Times

“There are a lot of people, because of the downsizing of Wall Street, who won’t be getting a paycheck at all,” said Joshua S. Siegel, the managing principal of Stone Capital Partners, a fund that manages $2.2 billion. “They would love to be involved.”

Of all the challenges that the Treasury faces, the trickiest might be determining a price for the largely unwanted wreckage it will be buying. Many of the junk loans and mortgage-backed securities have no market price at all because they have no potential buyers. The firms hired by the government will have enormous power to push the “market” price up or down as they choose.

If the government bargains to buy at the lowest possible price, it will protect taxpayers. But forcing the banks to book big losses could be self-defeating if they cannot resume lending until they raise fresh capital. If the government agrees to buy the assets at the value at which banks are keeping them on their balance sheets, taxpayers will almost certainly be overpaying.

The “right” price will depend on whether the government is favoring buyers or sellers. Many banks are hoping that the government will pay close to par — the value listed in their books.

But hedge fund managers and other potential buyers are demanding that the government push for the much lower price, based on the current trading value of the assets. These potential buyers are hoping they can piggyback onto the Treasury program, perhaps even acquiring distressed assets alongside the Treasury in auctions.

There are similar debates over how the Treasury should organize the plan. Most financial experts agree it would be impossible to build an internal operation of this size in a few weeks.

“It’s essential they outsource almost everything possible,” said T. Timothy Ryan Jr., president of the Securities Industry and Financial Markets Association. “The one thing they can’t outsource is the final decision, and they can’t outsource the infrastructure — people, hiring policies, contracting rules. But they can hire people to do everything else.”

Mr. Ryan is a former director of the Office of Thrift Supervision, where he played a key role in the savings and loan cleanup. Still, some investors are troubled by the government’s heavy reliance on private firms. They said it would be difficult to prevent firms from steering capital in ways that favor their private customers.

Inevitably, large asset management firms own, or are tied to banks that own, some of the same securities the government is seeking to sell. Pimco, for example, is owned by Allianz, one of Germany’s largest insurance companies. Merrill Lynch owns a stake in BlackRock.

“I can’t even fathom how I would manage that,” Mr. Siegel said. “How would I manage one side, where I’m seeking to maximize profit, and the other side, where I’m looking out for the social good?”

The law stipulates that the government must prevent conflicts of interest in the hiring of firms, the decision of which assets to buy, the management of those assets and even the jobs held by employees after they leave the program. But it leaves the details to the Treasury.

The Treasury plans to publish guidelines for hiring the asset management firms in the next day or two, officials said. Some experts say that the department simply needs to gird itself for protests.

“You’re never going to get past conflicts of interest, so you take your lumps,” said Peter J. Wallison, who was general counsel of the Treasury during the Reagan administration.

The bailout legislation itself highlights the contradictory goals that the Treasury will face when it goes on its buying spree. Among the goals it is supposed to consider are “protecting taxpayers,” “preventing disruption to financial markets” and “the need to help families keep their homes.”

Democratic lawmakers insisted that the Treasury use its authority to help restructure many subprime mortgages so that at least some troubled homeowners could avoid foreclosure.

But the Treasury’s auction plan will make that difficult. More than 90 percent of all subprime mortgages are part of giant pools, or trusts, which sell mortgage-backed securities to investors around the world.

Before the government would be able to modify any mortgage that was in a trust, securities experts said, it would have to acquire agreement from 100 percent of the bondholders. But a senior Treasury official said the government would probably want to buy no more than half of the securities tied to a trust, which would hamper winning agreement from all investors.

Treasury officials have emphasized that the government will also be buying up whole mortgages, which have not been securitized, and that it may well buy whole mortgages through one-on-one negotiations with individual banks. Officials said they would probably experiment with other approaches as well.
Copyright © 2008 The New York Times

URL: http://www.cnbc.com/id/27021790/

[*~1Best~*]

Pressured to Take Risks, Fannie Hit a Tipping Point
BUSINESS BIZ COMPANIES
The New York Times
| 05 Oct 2008 | 03:54 PM ET

“Almost no one expected what was coming. It’s not fair to blame us for not predicting the unthinkable.“— Daniel H. Mudd, former chief executive, Fannie Mae

When the mortgage giant Fannie Mae recruited Daniel H. Mudd, he told a friend he wanted to work for an altruistic business. Already a decorated marine and a successful executive, he wanted to be a role model to his four children — just as his father, the television journalist Roger Mudd, had been to him.

Fannie , a government-sponsored company, had long helped Americans get cheaper home loans by serving as a powerful middleman, buying mortgages from lenders and banks and then holding or reselling them to Wall Street investors. This allowed banks to make even more loans — expanding the pool of homeowners and permitting Fannie to ring up handsome profits along the way.

But by the time Mr. Mudd became Fannie’s chief executive in 2004, his company was under siege. Competitors were snatching lucrative parts of its business. Congress was demanding that Mr. Mudd help steer more loans to low-income borrowers. Lenders were threatening to sell directly to Wall Street unless Fannie bought a bigger chunk of their riskiest loans.

So Mr. Mudd made a fateful choice. Disregarding warnings from his managers that lenders were making too many loans that would never be repaid, he steered Fannie into more treacherous corners of the mortgage market, according to executives.

For a time, that decision proved profitable. In the end, it nearly destroyed the company and threatened to drag down the housing market and the economy.

Dozens of interviews, most from people who requested anonymity to avoid legal repercussions, offer an inside account of the critical juncture when Fannie Mae’s new chief executive, under pressure from Wall Street firms, Congress and company shareholders, took additional risks that pushed his company, and, in turn, a large part of the nation’s financial health, to the brink.

Between 2005 and 2008, Fannie purchased or guaranteed at least $270 billion in loans to risky borrowers — more than three times as much as in all its earlier years combined, according to company filings and industry data.

“We didn’t really know what we were buying,” said Marc Gott, a former director in Fannie’s loan servicing department. “This system was designed for plain vanilla loans, and we were trying to push chocolate sundaes through the gears.”

Last month, the White House was forced to orchestrate a $200 billion rescue of Fannie and its corporate cousin, Freddie Mac . On Sept. 26, the companies disclosed that federal prosecutors and the Securities and Exchange Commission were investigating potential accounting and governance problems.

Mr. Mudd said in an interview that he responded as best he could given the company’s challenges, and worked to balance risks prudently.

“Fannie Mae faced the danger that the market would pass us by,” he said. “We were afraid that lenders would be selling products we weren’t buying and Congress would feel like we weren’t fulfilling our mission. The market was changing, and it’s our job to buy loans, so we had to change as well.”

Dealing With Risk

When Mr. Mudd arrived at Fannie eight years ago, it was beginning a dramatic expansion that, at its peak, had it buying 40 percent of all domestic mortgages.

Just two decades earlier, Fannie had been on the brink of bankruptcy. But chief executives like Franklin D. Raines and the chief financial officer J. Timothy Howard built it into a financial juggernaut by aiming at new markets.

Fannie never actually made loans. It was essentially a mortgage insurance company, buying mortgages, keeping some but reselling most to investors and, for a fee, promising to pay off a loan if the borrower defaulted. The only real danger was that the company might guarantee questionable mortgages and lose out when large numbers of borrowers walked away from their obligations.

So Fannie constructed a vast network of computer programs and mathematical formulas that analyzed its millions of daily transactions and ranked borrowers according to their risk.

Those computer programs seemingly turned Fannie into a divining rod, capable of separating pools of similar-seeming borrowers into safe and risky bets. The riskier the loan, the more Fannie charged to handle it. In theory, those high fees would offset any losses.

With that self-assurance, the company announced in 2000 that it would buy $2 trillion in loans from low-income, minority and risky borrowers by 2010.

All this helped supercharge Fannie’s stock price and rewarded top executives with tens of millions of dollars. Mr. Raines received about $90 million between 1998 and 2004, while Mr. Howard was paid about $30.8 million, according to regulators. Mr. Mudd collected more than $10 million in his first four years at Fannie.

Whenever competitors asked Congress to rein in the company, lawmakers were besieged with letters and phone calls from angry constituents, some orchestrated by Fannie itself. One automated phone call warned voters: “Your congressman is trying to make mortgages more expensive. Ask him why he opposes the American dream of home ownership.”

The ripple effect of Fannie’s plunge into riskier lending was profound. Fannie’s stamp of approval made shunned borrowers and complex loans more acceptable to other lenders, particularly small and less sophisticated banks.

Between 2001 and 2004, the overall subprime mortgage market — loans to the riskiest borrowers — grew from $160 billion to $540 billion, according to Inside Mortgage Finance, a trade publication. Communities were inundated with billboards and fliers from subprime companies offering to help almost anyone buy a home.

Within a few years of Mr. Mudd’s arrival, Fannie was the most powerful mortgage company on earth.

Then it began to crumble.

Regulators, spurred by the revelation of a wide-ranging accounting fraud at Freddie, began scrutinizing Fannie’s books. In 2004 they accused Fannie of fraudulently concealing expenses to make its profits look bigger.

Mr. Howard and Mr. Raines resigned. Mr. Mudd was quickly promoted to the top spot.

But the company he inherited was becoming a shadow of its former self.

‘You Need Us’

Shortly after he became chief executive, Mr. Mudd traveled to the California offices of Angelo R. Mozilo, the head of Countrywide Financial, then the nation’s largest mortgage lender. Fannie had a longstanding and lucrative relationship with Countrywide, which sold more loans to Fannie than anyone else.

But at that meeting, Mr. Mozilo, a butcher’s son who had almost single-handedly built Countrywide into a financial powerhouse, threatened to upend their partnership unless Fannie started buying Countrywide’s riskier loans.

Mr. Mozilo, who did not return telephone calls seeking comment, told Mr. Mudd that Countrywide had other options. For example, Wall Street had recently jumped into the market for risky mortgages. Firms like Bear Stearns, Lehman Brothers and Goldman Sachs had started bundling home loans and selling them to investors — bypassing Fannie and dealing with Countrywide directly.

“You’re becoming irrelevant,” Mr. Mozilo told Mr. Mudd, according to two people with knowledge of the meeting who requested anonymity because the talks were confidential. In the previous year, Fannie had already lost 56 percent of its loan-reselling business to Wall Street and other competitors.

“You need us more than we need you,” Mr. Mozilo said, “and if you don’t take these loans, you’ll find you can lose much more.”

Then Mr. Mozilo offered everyone a breath mint.

Investors were also pressuring Mr. Mudd to take greater risks.

On one occasion, a hedge fund manager telephoned a senior Fannie executive to complain that the company was not taking enough gambles in chasing profits.

“Are you stupid or blind?” the investor roared, according to someone who heard the call, but requested anonymity. “Your job is to make me money!”

Capitol Hill bore down on Mr. Mudd as well. The same year he took the top position, regulators sharply increased Fannie’s affordable-housing goals. Democratic lawmakers demanded that the company buy more loans that had been made to low-income and minority homebuyers.

“When homes are doubling in price in every six years and incomes are increasing by a mere one percent per year, Fannie’s mission is of paramount importance,” Senator Jack Reed, a Rhode Island Democrat, lectured Mr. Mudd at a Congressional hearing in 2006. “In fact, Fannie and Freddie can do more, a lot more.”

But Fannie’s computer systems could not fully analyze many of the risky loans that customers, investors and lawmakers wanted Mr. Mudd to buy. Many of them — like balloon-rate mortgages or mortgages that did not require paperwork — were so new that dangerous bets could not be identified, according to company executives.

Even so, Fannie began buying huge numbers of riskier loans.

In one meeting, according to two people present, Mr. Mudd told employees to “get aggressive on risk-taking, or get out of the company.”

In the interview, Mr. Mudd said he did not recall that conversation and that he always stressed taking only prudent risks.

Employees, however, say they got a different message.

“Everybody understood that we were now buying loans that we would have previously rejected, and that the models were telling us that we were charging way too little,” said a former senior Fannie executive. “But our mandate was to stay relevant and to serve low-income borrowers. So that’s what we did.”

Between 2005 and 2007, the company’s acquisitions of mortgages with down payments of less than 10 percent almost tripled. As the market for risky loans soared to $1 trillion, Fannie expanded in white-hot real estate areas like California and Florida.

For two years, Mr. Mudd operated without a permanent chief risk officer to guard against unhealthy hazards. When Enrico Dallavecchia was hired for that position in 2006, he told Mr. Mudd that the company should be charging more to handle risky loans.

In the following months to come, Mr. Dallavecchia warned that some markets were becoming overheated and argued that a housing bubble had formed, according to a person with knowledge of the conversations. But many of the warnings were rebuffed.

Mr. Mudd told Mr. Dallavecchia that the market, shareholders and Congress all thought the companies should be taking more risks, not fewer, according to a person who observed the conversation. “Who am I supposed to fight with first?” Mr. Mudd asked.

In the interview, Mr. Mudd said he never made those comments. Mr. Dallavecchia was among those whom Mr. Mudd forced out of the company during a reorganization in August.

Mr. Mudd added that it was almost impossible during most of his tenure to see trouble on the horizon, because Fannie interacts with lenders rather than borrowers, which creates a delay in recognizing market conditions.

He said Fannie sought to balance market demands prudently against internal standards, that executives always sought to avoid unwise risks, and that Fannie bought far fewer troublesome loans than many other financial institutions. Mr. Mudd said he heeded many warnings from his executives and that Fannie refused to buy many risky loans, regardless of outside pressures .

“You’re dealing with massive amounts of information that flow in over months,” he said. “You almost never have an ‘Oh, my God’ moment. Even now, most of the loans we bought are doing fine.”

But, of course, that moment of truth did arrive. In the middle of last year it became clear that millions of borrowers would stop paying their mortgages. For Fannie, this raised the terrifying prospect of paying billions of dollars to honor its guarantees.

Sustained by Government

Had Fannie been a private entity, its comeuppance might have happened a year ago. But the White House, Wall Street and Capitol Hill were more concerned about the trillions of dollars in other loans that were poisoning financial institutions and banks.

Lawmakers, particularly Democrats, leaned on Fannie and Freddie to buy and hold those troubled debts, hoping that removing them from the system would help the economy recover. The companies, eager to regain market share and buy what they thought were undervalued loans, rushed to comply.

The White House also pitched in. James B. Lockhart, the chief regulator of Fannie and Freddie, adjusted the companies’ lending standards so they could purchase as much as $40 billion in new subprime loans. Some in Congress praised the move.

“I’m not worried about Fannie and Freddie’s health, I’m worried that they won’t do enough to help out the economy,” the chairman of the House Financial Services Committee, Barney Frank, Democrat of Massachusetts, said at the time. “That’s why I’ve supported them all these years — so that they can help at a time like this.”

But earlier this year, Treasury Secretary Henry M. Paulson Jr. grew concerned about Fannie’s and Freddie’s stability. He sent a deputy, Robert K. Steel, a former colleague from his time at Goldman Sachs, to speak with Mr. Mudd and his counterpart at Freddie.

Mr. Steel’s orders, according to several people, were to get commitments from the companies to raise more money as a cushion against all the new loans. But when he met with the firms, Mr. Steel made few demands and seemed unfamiliar with Fannie’s and Freddie’s operations, according to someone who attended the discussions.

Rather than getting firm commitments, Mr. Steel struck handshake deals without deadlines.

That misstep would become obvious over the coming months. Although Fannie raised $7.4 billion, Freddie never raised any additional money.

Mr. Steel, who left the Treasury Department over the summer to head Wachovia bank, disputed that he had failed in his handling of the companies, and said he was proud of his work .

As the housing crisis worsened, Fannie and Freddie announced larger losses, and shares continued falling.

In July, Mr. Paulson asked Congress for authority to take over Fannie and Freddie, though he said he hoped never to use it. “If you’ve got a bazooka and people know you’ve got it, you may not have to take it out,” he told Congress.

Mr. Mudd called Treasury weekly. He offered to resign, to replace his board, to sell stock, and to raise debt. “We’ll sign in blood anything you want,” he told a Treasury official, according to someone with knowledge of the conversations.

But, according to that person, Mr. Mudd told Treasury that those options would work only if government officials publicly clarified whether they intended to take over Fannie. Otherwise, potential investors would refuse to buy the stock for fear of being wiped out.

“There were other options on the table short of a takeover,” Mr. Mudd said. But as long as Treasury refused to disclose its goals, it was impossible for the company to act, according to people close to Fannie.

Then, last month, Mr. Mudd was instructed to report to Mr. Lockhart’s office. Mr. Paulson told Mr. Mudd that he could either agree to a takeover or have one forced upon him.

“This is the right thing to do for the economy,” Mr. Paulson said, according to two people with knowledge of the talks. “We can’t take any more risks.”

Freddie was given the same message. Less than 48 hours later, Mr. Lockhart and Mr. Paulson ended Fannie and Freddie’s independence, with up to $200 billion in taxpayer money to replenish the companies’ coffers.

The move failed to stanch a spreading panic in the financial world. In fact, some analysts say, the takeover accelerated the hysteria by signaling that no company, no matter how large, was strong enough to withstand the losses stemming from troubled loans.

Within weeks, Lehman Brothers was forced to declare bankruptcy, Merrill Lynch was pushed into the arms of Bank of America, and the government stepped in to bail out the insurance giant the American International Group.

Today, Mr. Paulson is scrambling to carry out a $700 billion plan to bail out the financial sector, while Mr. Lockhart effectively runs Fannie and Freddie.

Mr. Raines and Mr. Howard, who kept most of their millions, are living well. Mr. Raines has improved his golf game. Mr. Howard divides his time between large homes outside Washington and Cancun, Mexico, where his staff is learning how to cook American meals.

But Mr. Mudd, who lost millions of dollars as the company’s stock declined and had his severance revoked after the company was seized, often travels to New York for job interviews. He recalled that one of his sons recently asked him why he had been fired.

“Sometimes things don’t work out, no matter how hard you try,” he replied.
Copyright © 2008 The New York Times

URL: http://www.cnbc.com/id/27036340/

[*~1Best~*]

Market Logs Its Worst Week in 7 Years
WALL STREET, BAILOUT, STOCKS, STOCK MARKET, DOW JONES, NASDAQ, S&P, CONGRESS
Posted By: Cindy Perman | Writer
CNBC.com
| 03 Oct 2008 | 06:22 PM ET

Wall Street capped its worst week in seven years with a late day selloff as traders briefly celebrated the House's approval of the Wall Street bailout, then yanked their positions ahead of the weekend.

"Definitely a sell-the-rally mentality," Dave Rovelli, managing director of US equity trading at Boston-based Canaccord Adams, said.

The Dow Jones Industrial Average ended down 157.15, or 1.5 percent, at 10325.38, after being up nearly 300 points at one point. (Track the Dow winners and losers.)

The S&P 500 fell 1.4 percent, while the Nasdaq declined 1.5 percent.

Anxiety resurfaced in the market, with the CBOE Volatility Index topping 45. The VIX hit a new 52-week high of 48.40 on Monday.

The S&P 500 and the Nasdaq had their worst week since September 2001, and the Dow had its worst week since July 2002.

The Nasdaq was hardest hit this week as investors worried that the economic slump will take a toll on tech spending. IBM had the most negative impact on the Dow, falling 13 percent this week, and Apple was the week's biggest drag on the Nasdaq 100, tumbling over 24 percent.

For the year, all three major indexes are down more than 20 percent and the VIX, the best gauge of fear in the market, is up more than 100 percent.

The House approved the bailout bill early Friday afternoon and President Bush expeditiously signed it, capping a wild week that saw the Dow plunge a record 777 points on Monday, clawed back about 485 points on Tuesday, then fall for three straight sessions to end the week down nearly 815 points.

The plan, already approved by the Senate, will allow the government to buy bad mortgage-related securities and other troubled assets at a discounted price.

The bill's approval was cheered on the trading floor but it doesn't signal the all clear for the market. That was apparent in the last half hour of trading as the hoopla quickly dissolved into a frenzy of selling activity.

The late sell-off was the market "voting that the plan that [Congress] came out with today may not work," Rick Schottenfeld, chairman of Schottenfeld Group, told CNBC. "It goes a long way to help ... but I don't think it's going to do anything for the asset values," he said. "I think there are problems that are still ahead of us."

There was also the worry that it won't help unlock the credit market.

"Right now, short term ... we're going to be focusing on that Libor to see if we can break that stranglehold on the credit markets—that's critical," said Marc Pado, U.S. market strategist at Cantor Fitzgerald in San Francisco.

And, of course, there's the economy, which will get more of the market's attention once the financial system gets moving again.

Today brought a few more dismal numbers: U.S. employers cut nonfarm payrolls by 159,000, the steepest rate in 5 1/2 years, while the unemployment rate was unchanged at 6.1 percent. A separate report showed the service sector barely grew in September.

Wachovia shares rocketed 74 percent following news that it will be bought by Wells Fargo in an all-stock transaction worth $15.1 billion. Shares of Wells Fargo slipped 1.7 percent.
Fast Money: Your First Move for Monday, October 6

The deal essentially pulled the rug out from underneath Citigroup , which had been in an FDIC-orchestrated deal to buy Wachovia. Citigroup said it may file a lawsuit to stop the deal.

Citigroup was the biggest drag on the Dow, falling more than 18 percent.

Financial stocks, which had rallied on expectations the bill would pass, sold off in the last half hour as traders began to worry about the end of the short-selling ban, which is set to expire three days from the passage of the bill, which would be Thursday.

The S&P 500 financial sector index ended down more than 3 percent.

AIG shares fell 4 percent. The insurance giant said it will sell off a number of business units in an effort to become a smaller, more nimble company in the wake of an $85 billion bailout from the federal government.

Other insurers advanced, including Hartford Financial and MetLife , after getting beaten up this week amid speculation that another sector domino would be falling in the wake of AIG.

Regional banks continued to rally after getting hammered earlier in the week. National City and Sovereign Bancorp finished up more than 11 percent.

Apple shares ended down 3 percent, off its earlier low, after a spokesman declared untrue a rumor that CEO Steve Jobs had suffered a heart attack. The stock had plunged to a new low of $94.65 at the opening bell as the rumor made the rounds.

Blue-chip techs finished mixed as a recovery from Thursday's bludgeoning fizzled.

Research In Motion and Google skidded, while Microsoft and Intel ticked higher.

CNBC parent General Electric saw its shares drop another 2.6 percent, adding to the prior session's 10-percent decline. Earlier this week, the company announced plans to raise $12 billion through a common stock offering and that it is selling $3 billion of preferred shares to Warren Buffett's Berkshire Hathaway.

Crude oil lost 12 percent this week, settling at 93.88 a barrel, after ending last week just shy of $107. The dollar rose against the euro.

So, what happens to the market now?

Financials will likely remain under pressure as the short-selling ban is set to be lifted on Thursday. And, investors will be closely watching the credit market for any sign that banks are starting to lend again.

"I think the real thing settling in now is that it's going to be a month before this thing [the bailout plan] gets off the ground and they're still unsure of how they would do it," said Jim Paulsen, a strategist for Wells Capital Management in Minneapolis.

"And that's a long time when the house is on fire!" he said.

"We've got to get the short-term markets unfrozen right now," Paulsen said. "We've gotta do something besides let it burn for a month."

Paulsen said maybe the Fed can set up something in the interim, or money-market funds can stretch their durations to get the money flowing again. Or, maybe private investors will jump in to try to get in front of the government bids for companies' devalued assets.

There was a false sense that "If we get this thing passed, the knowledge that it's coming will be enough" to calm the market, Paulsen said. "I'm not sure that's good enough."

We'll get a read on the housing sector next week, with pending-home sales on Wednesday. Plus, a read on consumers, with retailers reporting chain-store sales for September on Thursday.

And, get ready ... we'll see just how tough it is out there as earnings season kicks off with Alcoa on Tuesday.

On Tap for Next Week:

TUESDAY: Bernanke, Stern speak; Fed minutes; consumer credit; Earnings season kicks off with Alcoa, Yum Brands
WEDNESDAY: Weekly mortgage applications; Fed's Plosser speaks; Pending-home sales; Weekly crude inventories; Earnings from Costco, Monsanto and Ruby Tuesday
THURSDAY: Retailers report Sept. sales; Bank of England announcement; Weekly jobless claims; Wholesale trade; Natural-gas inventories; Fed's Stern speaks; Earnings from Chevron
FRIDAY: Import/export prices; International trade; Treasury budget; Earnings from GE
© 2008 CNBC.com

URL: http://www.cnbc.com/id/27012699/

[*~1Best~*]

Americans don't even know that they are completely robbed ~~ savings, home equities, and now in debt.

The grand scam of world freemarketeers.

[*~1Best~*]

Financial Rescue Measure Is Signed By President
FINANCIAL RESCUE MEASURE IS SIGNED BY PRESIDENT
CNBC staff and wire reports
| 03 Oct 2008 | 03:01 PM ET

President Bush has signed into law a far-reaching $700 billion bill to bail out the nation's tottering financial industry, shortly after it won final approval from Congress.

The president signed the measure at his desk in the Oval Office. Photographers were invited in to capture the moment.

The president signed the bill after returning from the Treasury Department where he thanked employees for their work on the rescue package.

The House approved a revised $700 billion financial rescue package, ending a weeklong battle over a controversial measure after lawmakers came under pressure to head off a growing financial crisis.

The plan, which was already approved by the Senate, would allow the government to spend billions of dollars to buy bad mortgage-related securities and other devalued assets from troubled financial institutions.

If it works, advocates say, that would allow frozen credit to begin flowing again and prevent a serious recession.
# Now, What About Stocks?
# What's in the Revised Measure
# Why There's a Tax Break for Arrows

US stocks, which had rallied earlier on hopes of approval, began paring their gains after the measure was passed.

The dollar fell against the euro while oil prices fell back.

After the House rejected the initial measure on Monday, the Senate revised the bill, adding billions of dollars ot tax breaks to sweeten the package, and approved it Wednesday night.

In efforts to appease GOP opponents, the revised measure includes raising the limit on federal insurance for bank deposits from $100,000 to $250,000.

The bill also extends several tax breaks popular with businesses, provisions that are favorites for most Republicans.

It would keep the alternative minimum tax from hitting 20 million middle-income Americans, which appeals to lawmakers in both parties.

For Investors
# Protect Your Wealth in Turbulent Times
# Is This Really the Market Bottom?
# Five Ways to Play This Wild Market
# Jim Cramer's Web Exclusive: Pans
# Buffett's Three Rules for Crisis Investing

And it would provide $8 billion in tax relief for those hit by natural disasters in the Midwest, Texas and Louisiana.

A Republican member of the House Financial Services Committee told CNBC shortly before the vote that he believed there were enough votes in the House to pass the bill.

"We feel like we do" have enough 'yes' votes," Rep. Adam Putnam of Florida said. "(House) Speaker (Nancy) Pelosi has said she will not bring the bill to the floor if it doesn't appear they have the votes to pass it."

He said both Democratic and Republican leaders had been talking to their members to line up the votes.

He said public comments had indicated a number of lawmakers who had voted against the bill on Monday had been persuaded to vote for it by new data or changes that had been made to the bill.

"I'm optimistic about today," House Minority Leader John Boehner told reporters earlier. "We're not going to take anything for granted. We're going to continue to talk to our members. But it's time to act on behalf of the American people. It's about their savings. It's about their jobs."

Earlier, the US reported its biggest monthly job loss in 5 1/2 years, coming on top of a pile of economic data pointing to an approaching recession. Data showed the U.S. services sector holding up.

"The data has been horrible all week long. It absolutely does put pressure on them to get this rescue act passed," said Fred Dickson, market strategist at D.A. Davidson in Lake Oswego, Oregon. "It's a bill with risks, but it's a plan and the market needs a plan."

—AP and Reuters contributed to this report.
© 2008 CNBC

URL: http://www.cnbc.com/id/27010467/

[*~1Best~*]

Wells Fargo to Buy Wachovia for $15.1 Billion
WELLS FARGO, WACHOVIA
CNBC.com
| 03 Oct 2008 | 08:10 AM ET

Wells Fargo and Wachovia agreed to merge, in a transaction requiring no financial assistance from the government, the two banks said on Friday.

Prior to receiving the Wells Fargo proposal, Wachovia had been negotiating with Citigroup to complete a transaction supervised by the Federal Deposit Insurance Corporation (FDIC) that included assistance from the government.

"For Citigroup, this is a real loss...this was a deal that was going to save them as much as it was saving Wachovia," Cassandra Toroian, Chief Investment Officer at Bell Rock Capital, told Reuters.

"I think it was a really smart move by Wachovia to entertain a Wells Fargo, obviously unsolicited, bid. I guess they figured they were doing the right thing for shareholders," Toroian added. "I think it's a better deal for them."

Under the agreement, Wells Fargo will acquire all outstanding shares of common stock of Wachovia in a stock-for-stock transaction, the banks said in a statement. Wells Fargo will acquire all of Wachovia Corporation, including its preferred equity and indebtedness, and all its banking deposits.

"This deal enables us to keep Wachovia intact and preserve the value of an integrated company, without government support," said Wachovia President and Chief Executive Robert Steel.

The all-stock deal values Wachovia at $7 a share, or around $15.1 billion, based on Wells Fargo's closing stock price of $35.16 on Thursday, the banks said.

"This is an example of separating the winners and the losers in financial services, so looks like strong hands are coming in, in the form of Wells, and shaking things up a little bit," Peter Fisher, managing director at BlackRock, told CNBC.

Wachovia shares were up 64 percent to $6.42 before the bell. Futures rose after the news.

Under the terms of the deal, Wachovia shareholders will receive 0.1991 share of Wells Fargo common stock in exchange for each share of Wachovia common stock.

Wells Fargo said it expects to incur merger and integration charges of approximately $10 billion and it plans to issue up to $20 billion of new Wells Fargo securities, primarily common stock.

The agreement requires the approval of Wachovia shareholders and customary approvals of regulators.

The deal is expected to add to earnings per share in the first year of operations, Wells Fargo said.

"It's better for Citi to go it alone right now," said Christopher Whalen, senior vice president and managing director at Institutional Risk Analytics.

The combined company would base its East Coast retail and commercial and corporate banking business in Charlotte, North Carolina. St. Louis will remain the headquarters of Wachovia Securities.

-- Reuters contributed to this report
© 2008 CNBC.com

URL: http://www.cnbc.com/id/27005847/

[*~1Best~*]

Senate Passes~~"There's no question this is a rescue plan, but it's a rescue plan for the American economy, not for Wall Street," Buffett told CNBC. "This is designed to help the American economy from going into the ultimate tailspin."

Buffett, an Obama supporter, added: "This is an economic Pearl Harbor, and the whole world wants to deleverage. The only entity in the world that can leverage up to match that force is the U.S. Treasury."

~~~~~~~~~~~~~~~~~~~~

Senate Passes Sweetened $700 Billion Bailout
SENATE, VOTE, BAILOUT, WALL STREET, BANKS, PAULSON, BERNANKE
CNBC staff and wire reports
| 01 Oct 2008 | 09:42 PM ET

The U.S. Senate voted in favor of a revised $700 billion bailout bill Wednesday night, breathing life back into closely watched legislation that supporters say will revive paralyzed credit markets in the United States.

What's in the Senate Plan What's the Best Way to Solve Crisis?

The White House and European policy makers have called the measure crucial to world financial health with recessionary signals mounting in the world's largest economy and the credit crisis reverberating among European banks.

Meanwhile, France and Germany clashed over the idea of a U.S.-style financial rescue fund for Europe amid further signs of contagion from the global credit crisis.

In Washington, Congressional leaders added two sweeteners to the bill—a tax cut and extended federal protection for bank deposits—in the hope that it would sail through the Senate and then return to the House for an up-or-down vote.

The vote came after another whirlwind day in the markets in which shares of bellwether U.S. conglomerate General Electric plunged as much as 9 percent on concerns about future earnings until super-investor Warren Buffett took a $3 billion stake.

The stock markets suggested investors expected the bailout to pass—but investors had also expected the House to approve the plan on Monday.

With all 435 members of the House and 35 of 100 Senators up for reelection on Nov. 4, politicians were fearful of voter backlash against a plan widely seen as a taxpayer bailout of Wall Street's errors.

Voter sentiment may have changed since Monday's rejection of the rescue plan by the House led to a 777-point plunge on the Dow, wiping billions of dollars off the value of retirement funds and personal wealth.

The presidential candidates, Republican John McCain and Democrat Barack Obama, left the campaign trail for Washington where they cast their votes as senators, both having said failure to pass the bill would have dire consequences.

Meanwhile, economists kept close watch on interbank interest rates, a measure of credit liquidity that is vital to fueling global economic activity.

Global money markets remained largely impaired on Wednesday, with banks wary of lending to each other—as they have been since the bankruptcy of Lehman Brothers and nationalization of other major financial institutions in the United States and Europe.

The bill before the Senate calls for the U.S. Treasury to buy distressed assets from financial firms staggering under the weight of failed mortgages, intending to clean up their balance sheets and jump-start lending.

Buffett addressed voter concerns about the bailout, calling it necessary to unfreeze credit and reinvigorate interbank lending.

"There's no question this is a rescue plan, but it's a rescue plan for the American economy, not for Wall Street," Buffett told CNBC. "This is designed to help the American economy from going into the ultimate tailspin."

Buffett, an Obama supporter, added: "This is an economic Pearl Harbor, and the whole world wants to deleverage. The only entity in the world that can leverage up to match that force is the U.S. Treasury." Click here to watch Buffett's interview on CNBC.

Lobbyists from the banking industry and the U.S. Chamber of Commerce were trying to identify House members who might reconsider their Monday "no" votes, and business executives around the world warned that the crisis would hit growth.

After Wall Street giants Bear Stearns, Lehman Brothers and Merrill Lynch were swallowed by rivals and with commercial banks teetering or collapsing, European banks have undergone their own tumult.

Lloyds TSB Group was poised to take over British rival HBOS, potentially at a cut-rate price. This came after the Dutch-Belgian bank Fortis was partially nationalized through an 11 billion euro bailout on Sunday.
© 2008 CNBC

URL: http://www.cnbc.com/id/26980684/

[*~1Best~*]

Senate Approval Predicted; House Likely to Vote Friday

Money power scam with media control brainwashing sheepsters.




~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

SENATE, VOTE, BAILOUT, WALL STREET, BANKS, PAULSON, BERNANKE
CNBC staff and wire reports
| 01 Oct 2008 | 01:25 PM ET

Prospects for a financial rescue plan improved as the Senate prepared to vote Wednesday night on a revised measure and House leaders said progress is being made in their chamber.

The Senate is expected to pass the bill late Wednesday and then send it to the House for a vote. The House is "likely" to vote Friday, a senior House Democratic aide said.

Democratic Sen. Charles Schumer of New York told CNBC that there was broad bipartisan support in the Senate and predicted the measure will be approved.

"The tone has changed," Schumer said in a live interview. The reason was that voters appeared to have softened their opposition to a bailout plan.

"Last week, it was overwhelmingly vote 'No,' " Schumer said. "Now it is 'well you may not like this plan, but do something.' "

House Republican Whip Roy Blunt of Missouri also said that prospects for passage have improved, and he said he was particularly heartened by indications the legislation has become more appealing to constituents back home.

For Investors
How to Stay Grounded During CrisisTaxes Will Go Up—What You Can DoStock Picks: Five Beaten-Up NamesWhat the Pros Say: Time to DiversifyThe Long and Short of Stock TradesWill Small Caps Lead the Market?Prep for 2009 Dollar BoomWhere Are Bonds Now?

The plan for Wednesday night's Senate vote was set after leaders there agreed to add tax breaks for businesses and the middle class and increase deposit insurance in an attempt to revive the legislation rejected by the House. Click here for details of Senate plan.

But House Majority Leader Steny Hoyer, D-Md., said on NBC's "Today" show he was concerned that the tax issues could complicate the chances of final congressional passage when the legislation comes back to the House floor for a vote.

"There's no doubt the tax package is very controversial," he said, adding that "there's no doubt in my mind that the Senate added this because they thought that's the only way they could get it passed." He said he wasn't pleased the tax provisions were attached to the bill.

There are concerns that moderate House Democrats known as "Blue Dogs" will be repulsed by the tax breaks, and could vote no because they have saying they don't want to see the deficit run up even further.

House GOP Whip Blunt said one of the reasons he is more optimistic is that lawmakers are hearing less vocal opposition from their districts.

He said that calls and e-mails to congressional offices that were running about 90 percent against the measure earlier now are at about "50-50." "It should be before the House as quickly as it can," Blunt said on NBC.

"But we should not set any artificial time limit here." He said that is one of the factors that doomed the bill, which was defeated 228-205 Monday, sending Wall Street into a nosedive with the biggest sell-off since the post-9-11 trading period.

Both Blunt and Hoyer said they thought the atmosphere on the Hill was more conducive to passage now, saying they believe an emerging consensus on raising the federal deposit insurance to $250,000 has helped significantly and that a House vote could come later this week.

Blunt also said he believes there's a better chance of getting the legislation enacted in the wake of a move to ease Security and Exchange Commission accounting rules in a way that would give businesses more leeway in how they value their assets.

Senate Banking Committee Chairman Christopher Dodd, D-Conn., emerged from a meeting Tuesday to tell told reporters, "I'm told a number of people who voted 'no' yesterday are having serious second thoughts about it."

House Speaker Nancy Pelosi, D-Calif., issued a statement that suggested she does not like the Senate move but did not reveal her plans.

"The Senate will vote tomorrow night and the Congress will work its will," Pelosi said Tuesday.

Democratic presidential nominee Barack Obama and his GOP rival, John McCain, planned to fly to Washington for the Senate vote, as did Democratic vice presidential nominee Joe Biden.

The expected support of both Obama and McCain will make it difficult for Pelosi to ship the measure back to the Senate with a different set of vote-getting add-ons.
© 2008 CNBC

URL: http://www.cnbc.com/id/26972599/

[*~1Best~*]

The big scam 1911 ~ "John D. Rockefeller BOUGHT the U.S. government after the Supreme Court decision to outlaw his monopoly in 1911."

The same old big scam controlling US Government with evil greed Freemarketeer manipulation slaughtering sheepsters from the early US history.

http://trend-signals.blogspot.com/2008/09/energy-independence-palin-after-lindsey.html

[GotOptions?]

Right the thousands to millions only surpassed by the millions to billions like in this example. I sort of understand how the CDS markets worked but unless you are actually trading them its still a mystery somewhat.

[GotOptions?]

I wish I had 50 G's waiting for those to fall for I had a feeling they would, you would be a multi millionaire now.

[GotOptions?]

Those are LONG candle wicks, lots of volatility for daytraders.

[GotOptions?]

Just found this board and added it to favorites. Keep up the good work 1 best, You picked a hot topic in the bank index

[*~1Best~*]

From too much liquidity to No liquidity ~ THE OTHER EXTREME SIDE ~ We are at the other extreme side of credit crunch from too much cash around the world.

Just a couple of years ago, we had talking heads were crying out loud that we have too much cash and liquidity around the world.

The hype crowd was shorting financials and R.E. stocks, now, took out trillions from the markets.

Now we are at the other side of the extreme ~~> no liquidity

From too much liquidity to No liquidity


~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~



Credit Crunch Likely to Hit Consumers the Hardest
CREDIT FREEZE, CREDIT CRUNCH, CREDIT, STOCK MARKET NEWS, ECONOMY, BAILOUT, BANKS, BANKING
By Jeff Cox,
CNBC.com
CNBC.com
| 30 Sep 2008 | 01:12 PM ET

The credit freeze, which is shifting into overdrive heading into the holiday season, is expected to hit consumers harder than corporate America.

As banks continue to refuse credit even to qualified borrowers, business will feel the pinch but consumers will feel it even more. Companies have alternate ways to raise money, such as selling stock and bonds. But consumers have few options besides bank loans and credit cards, which are harder and more expensive to get.

So they will borrow less and thus spend less, setting up a potentially ugly fourth quarter not only for corporate earnings but the entire economy.

"The consumers just don't have anything to spend right now," says Rick Pendergraft, market analyst at Investor's Daily Edge newsletter. "As long as that's the case, we're not going to see any improvement in the economy."

Because consumer spending accounts for roughly two-thirds of economic growth, a sharp slowdown could push the US into a recession.

"If consumers can't spend and make acquisitions of goods," Pendergraft adds, "that's not going to help corporate earnings at this point in time unless they're doing a lot of business overseas."

The credit problems start at the top, where banks are balking even at lending to each other because of the riskiness of the entire sector and the corresponding surge in interest rates.

The interbank loan rate, known as Libor, posted its biggest one-day gain ever overnight, roaring 4.30 percentage points, or 430 basis points, to 6.87 percent, the highest in seven and a half years. (Track Libor and other key rates here)

That triggers a domino effect through the industry and makes it harder for consumers—who are at the end of the credit chain—to borrow money.

And even if Congress passes a revised financial rescue plan, as lawmakers pledged on Tuesday, the credit crunch is expected to continue for some time.

"The banking system now is simply too small given the size of the economy. There's not enough credit to go around now," Jim Bianco, president of Bianco Research, said on CNBC. "So we ration out the credit and we do it through these very high interest rates."

See Bianco's full analysis in video at left.

"We need to do one of two things--either expand the banking system to meet the demand that is out there, or we need to leverage, which is a very, very painful process. So long as the banking system remains too small, we're going to continue to have problems."

Companies will feel the pain in a number of ways that go beyond consumer behavior.

Retailers looking to borrow money to grow holiday inventories will have to dip into cash reserves or sell stock to raise money. Retail chief financial officers are expecting to cut inventories 37 percent, while 41 percent said they were experiencing credit tightening, according to a survey from BDO Seidman.

Pendergraft says the big winners in this environment will be discounters like Wal-Mart and Costco , both of which have strong cash positions and whose cut-rate products will be in demand as consumers look to save. Dillard's , meanwhile, will struggle as it tries to build inventories with a weak capital standing and a difficult credit environment, he said.

"I don't think retailers are going to be going out and building up inventories as we head into the holiday season," said Tom Higgins, chief economist at Payden & Rygel. "I think they'll run pretty thin inventories and then build as the cycle dictates."

Difficult, But Not Impossible

To be sure, credit is still out there, but the game has changed.

Consumers and companies with strong cash positions and credit ratings can still get credit, but at a higher rate and with tighter conditions.

Yet fears persist that unless Congress acts boldly the situation will worsen as the year progresses.

"Psychologically it's going to be very, very important both for the market and the companies directly affected by this--mainly banks and brokers," says Richard Sparks, senior analyst at Schaeffer's Investment Research. "For those sectors and those companies it's critical that something gets done. It seems as if they're very close and hopefully that will happen this week."

Not everyone, though, is convinced that a government bailout plan would have had a meaningful effect beyond propping up bank balance sheets, including institutions that eventually will fall anyway.

"I didn't think that bill they were voting on yesterday was going to do much good for anything," Bianco said. "Yes, it would have given a psychological boost--the problem is the banking system is too small. The banking system needs capital."

"It would have been a lot like all the other Paulson plans. None of them have worked so far," he continued. "This is just the sieve bailout, version 2008, which failed last year to get through."

In the meantime, retailers are bracing themselves for rough sledding ahead.

"The American consumer's in the retrenchment mode, building up savings as we go through this period where there's all this downside risk," Higgins said. "Consumer spending already looks very weak and we're expecting the fourth quarter to be no better. I think retailers are already thinking the same thing."
© 2008 CNBC.com

URL: http://www.cnbc.com/id/26956466/

[*~1Best~*]

Main Street Slaughter: short fortune of 10+ Trillion and 1.86+ Trillion short fortune in a day with bailout Bait and previously shorting fortune with colluded fund power, Main Street is bleeding while Wall Street is profiting.

We need to establish better Rules and Regulations.

Including the following as Bruce stated and I also noted in the past.

1. Require a firm pre-borrow for all short trades. This should include the options MMs. Complete elimination of all forms of naked shorting.

2. Reinstate the uptick rule.

3. Require hedge funds to disclose and to file financial statements just like any other funds (all are much smaller) institutional investor.

4. Eliminate mark to market for illiquid assets. If they are not for sale, they should be valued according to model.

[*~1Best~*]

Paulson/Greenspan gang grand scam ~ BIG bailout Decoy, the Bailout is a decoy for the sell-off. They are making fortune shorting markets.

The legal criminals made the BIG DECOY for the sell-off, the big excuse to make trillions for themselves.

After robbing the country, dump skeleton USA to the next as they know that they are losing.

They are BAILING OUT from RACE with BIG FORTUNE!!

[*~1Best~*]

Big financial fiasco scam:

Paulson/greenspan gang evil greed monsters crushed markets with financial fiasco drama.

 
  $COMPX     1983.73 -199.61 -9.14%  
  $INDU     10365.45        -777.68 -6.98%  
  $INX      1106.42 -106.59 -8.79%

Obviously, Republicans know that they are losing the race, so they are robbing Main Street before they got out.

Now they are robbing Americans 401k after they robbed American savings and house equities!