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Dow Jones -190.00 10174.00 10/5 10:12pm
The Cardinal Moons of October
by Francis Bussiere
Breadth Summation index remains Bearish
http://www.safehaven.com/showarticle.cfm?id=11461&pv=1
Ike environmental toll apparent
By DINA CAPPIELLO, FRANK BASS and CAIN BURDEAU, Associated Press Writers
1 hour, 48 minutes ago
Hurricane Ike's winds and massive waves destroyed oil platforms, tossed storage tanks and punctured pipelines. The environmental damage only now is becoming apparent: At least a half million gallons of crude oil spilled into the Gulf of Mexico and the marshes, bayous and bays of Louisiana and Texas, according to an analysis of federal data by The Associated Press.
In the days before and after the deadly storm, companies and residents reported at least 448 releases of oil, gasoline and dozens of other substances into the air and water and onto the ground in Louisiana and Texas. The hardest hit places were industrial centers near Houston and Port Arthur, Texas, as well as oil production facilities off Louisiana's coast, according to the AP's analysis.
"We are dealing with a multitude of different types of pollution here ... everything from diesel in the water to gasoline to things like household chemicals," said Larry Chambers, a petty officer with the U.S. Coast Guard Command Center in Pasadena, Texas.
The Coast Guard, with the Environmental Protection Agency and state agencies, has responded to more than 3,000 pollution reports associated with the storm and its surge along the upper Texas coast. Most callers complain about abandoned propane tanks, paint cans and other hazardous materials containers turning up in marshes, backyards and other places.
No major oil spills or hazardous materials releases have been identified, but nearly 1,500 sites still need to be cleaned up.
The Coast Guard's National Response Center in Washington collects information on oil spills and chemical and biological releases and passes it to agencies working on the ground. The AP analyzed all reports received by the center from Sept. 11 through Sept. 18 for Louisiana and Texas, providing an early snapshot of Ike's environmental toll.
With the storm approaching, refineries and chemical plants shut down as a precaution, burning off hundreds of thousands of pounds of organic compounds and toxic chemicals. In other cases, power failures sent chemicals such as ammonia directly into the atmosphere. Such accidental releases probably will not result in penalties by regulators because the releases are being blamed on the storm.
Texas Gov. Rick Perry also suspended all rules, including environmental ones, that would inhibit or prevent companies preparing for or responding to Ike.
Power outages also caused sewage pipes to stop flowing. Elsewhere, the storm's surge dredged up smelly and oxygen-deprived marsh mud, which killed fish and caused residents to complain of nausea and headaches from the odor.
At times, a new spill or release was reported to the Coast Guard every five minutes to 10 minutes. Some were extremely detailed, such as this report from Sept. 14: "Caller is making a report of a 6-by-4-foot container that was found floating in the Houston Ship Channel. Caller states the container was also labeled 'UM 3264,' which is a corrosive material." The caller most likely meant UN3264, an industrial coding that refers to a variety of different acids.
State and federal officials have collected thousands of abandoned drums, paint cans and other containers.
Other reports were more vague. One caller reported a sheen from an underwater pipeline and said the substance was "spewing" from the pipe.
The AP's analysis found that, by far, the most common contaminant left in Ike's wake was crude oil — the lifeblood and main industry of both Texas and Louisiana. In the week of reports analyzed, enough crude oil was spilled nearly to fill an Olympic-sized swimming pool, and more could be released, officials said, as platforms and pipelines were turned back on.
The Minerals Management Service, which oversees oil production in federal waters offshore, said the storm destroyed at least 52 oil platforms of roughly 3,800 in the Gulf of Mexico. Thirty-two more were severely damaged. But there was only one confirmed report of an oil spill — a leak of 8,400 gallons that officials said left no trace because it dissipated with the winds and currents.
Air contaminants were the second-most common release, mostly from the chemical plants and refineries along the coast.
About half the crude oil was reported spilled at a facility operated by St. Mary Land and Exploration Co. on Goat Island, Texas, a spit of uninhabited land north of the heavily damaged Bolivar Peninsula. The surge from the storm flooded the plant, leveling its dirt containment wall and snapping off the pipes connecting its eight storage tanks, which held the oil and water produced from two wells in Galveston Bay.
By the time the company reached the wreckage by boat more than 24 hours after Ike's landfall, the tanks were empty. Only a spattering of the roughly 266,000 gallons of oil spilled was left, and that is already cleaned up, according to Greg Leyendecker, the company's regional manager. The rest vanished, likely into the Gulf of Mexico.
Ike's fury might have helped prevent worse environmental damage. Its rough water, heavy rains and wind helped disperse pollution.
Air quality tests by Texas environmental regulators found no problems even in communities near industrial complexes, where power outages and high winds in some cases knocked out emergency devices that safely burn off chemicals. But the storm also zapped many of the state's permanent air pollution monitors in the region.
"We came out of this a lot better than we could have been, especially thinking where the storm hit," said Kelly Cook, the homeland security coordinator for the Texas Commission on Environmental Quality.
Katrina ranked as among the worst environmental disasters in U.S. history, with about 9 million gallons of oil spilled. But Ike's storm surge was less severe than feared — 12 feet rather than 20-feet plus — and the dikes, levees and bulkheads built around the region's heavy industry mostly held.
Much of that infrastructure is protected by a 1960s-era Army Corps of Engineers system of 15-foot levees similar to the one around New Orleans that failed catastrophically during Katrina. In that storm, floodwaters dislodged an oil tank at a Murphy Oil Corp. refinery in Meraux, La., spilling more than 1 million gallons of oil into the surrounding neighborhoods, canals and playgrounds.
Ike's toll on wildlife is still unfolding. Only a few pelicans and osprey turned up oiled, but the storm upended nature. Winds blew more than 1,000 baby squirrels from their nests. The storm's surge pushed saltwater into freshwater marshes and bayous, killing grasses where cattle graze and displacing alligators. Flooding also stranded cows.
The storm also may mangle migration. The Texas coast is a pit stop for birds heading south for the winter. But Ike wiped out many of their food sources, stripping berries from trees and nectar-producing flowers from plants, said Gina Donovan, executive director of the Houston Audubon Society, which operates 17 bird sanctuaries in Texas.
"It is going to cause wildlife to suffer for awhile," she said.
Along the Houston Ship Channel, a tanker truck floating in 12-feet-high flood waters slammed into a storage tank at the largest biodiesel refinery in the country, causing a leak of roughly 2,100 gallons of vegetable oil. The plant, owned by GreenHunter Energy Inc., uses chicken fat and beef tallow to make biodiesel shipped overseas. It opened just months earlier.
Oneal Galloway of Slidell, La., called to report oil in his neighborhood. The town, north of Lake Pontchartrain, was flooded with Ike's surge. He said oil had washed down the streets.
"It looked like a rainbow in the water," Galloway told the AP. "The residue of the oil is all over our fences, there were brown spots in the yard where it killed the grass."
The likely culprit was not a refinery or oil well, according to Shannon Davis, the director of the parish's public works department, but a neighbor brewing biodiesel in his backyard with used cooking grease.
___
Cain Burdeau reported from Texas.
___
On the Net:
Multi-agency Post-Hurricane Ike Pollution Response: http://strikeforcenews.com/go/site/771/
National Response Center: http://www.nrc.uscg.mil
http://news.yahoo.com/s/ap/20081005/ap_on_go_ot/hurricane_environment;_ylt=ArjZATVIXJ6BUZUhw7W42Aas0NUE
Some great reads here, suggest Brinker
if you have some time, he speaks to mark - market.
back to reading
Libor Mystifies Americans as Mayor Reads `Doomsday' (Update2)
By Peter Robison
Oct. 3 (Bloomberg) -- Anisha Gupta, returning clothes to a Hugo Boss store on Rodeo Drive in Beverly Hills, shrugged when asked about Libor. She had heard the term. She wasn't sure she could define it.
http://www.bloomberg.com/apps/news?pid=20601087&sid=ahZ4C6T_mjfk&refer=home {read from link bolded}
``I thought it was a pill,' said Gupta, an unemployed 27- year-old who lives in downtown Los Angeles.
Americans are getting a crash course as a once obscure acronym weighs on the economy. In interviews across the country, oil workers, ministers, bank managers and politicians said they were baffled by the London interbank offered rate or fearful of its surge this week. They agreed Libor was important, even if they couldn't put their finger on why.
``Without getting real specific, I think I'm probably not competent to be talking about what is happening overseas,' said Senator Jon Kyl, an Arizona Republican who helped shepherd passage of a $700 billion bank bailout as his party's No. 2 official. ``It's all happening very rapidly.'
Libor, set every morning in London, is what banks pay to borrow money from each other. That in turn determines prices for financial contracts valued at $393 trillion as of Dec. 31, 2007, or $60,000 for every person in the world, and helps set consumer interest rates on everything from home loans to credit cards.
In the past week, as governments in Europe rescued five banks and the U.S. debated a bailout, the cost of one-month bank loans in euros and overnight dollar loans soared to records. In practice, that means banks are hoarding cash, raising borrowing costs and slowing economies worldwide. Today's three-month Libor for loans in dollars jumped to 4.33 percent.
Still, explaining Libor can be a challenge.
`Very Destructive'
``What you have been seeing in the destruction of Libor in the last months, I cannot really point to that point and say this has impact on car sales,' said Fritz Henderson, the chief operating officer of General Motors Corp., in a TV interview. ``But certainly it is very destructive.'
The complexities showed during the bailout debate in Congress.
``Very few Americans have ever heard of something called the Libor,' said Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, on Oct. 1. He defined the term, then said, ``Libor jumped over 400 percent in just one day.'
Actually, overnight dollar loans rose 168 percent on Sept. 30, to a record 6.8 percent from 2.6 percent. Dodd was probably referring to the increase in basis points, or hundredths of a percent, which was 431. A spokesman at Dodd's office in Washington who didn't identify himself said when asked about that: ``I'm sorry. Libor?'
Christ Church Pastor
In New York, parishioners at Christ Church on Park Avenue are on a ``fast learning curve' about Libor and the economy, said Stephen Bauman, 56, the senior minister.
``I think many people have never questioned certain fundamental aspects of our institutional existence,' he said.
Hits on the Internet search engine Google show interest is increasing. In 2007, the U.S. wasn't in the top 10 countries where people searched for the term. Over the past 7 days, the U.S. has surged to No. 2, behind the Czech Republic, where Libor is a common first name. Worldwide, the number of hits rose tenfold from Sept. 7 to Sept. 30. Google Inc., based in Mountain View, California, won't disclose the total.
White House spokesman Tony Fratto said at a press briefing this week that officials closely watch Libor, then paused.
``Raise your hand if you're familiar with the Libor rate,' he said to two dozen reporters. Only one did, drawing nervous chuckles.
Seattle Bank Branch
Asked about Libor in Houston, Mike Heider, a 28-year-old drilling engineer, took a long drag on his cigarette, closed his eyes and after 10 seconds said he wasn't exactly sure. As for Libor's effect on the economy, he said, ``Couldn't tell you right now.'
An assistant bank branch manager in Seattle was equally mystified.
``I won't know the answer directly to that,' said Clayton Larsen, 30, in a Wells Fargo & Co. branch.
Libor is actually a set of rates, calculated for several currencies on periods ranging from overnight to 12 months. The British Bankers' Association compiles the dollar rate every day from data submitted by 16 banks, including Deutsche Bank AG and Royal Bank of Scotland Group Plc. There are also rates for the euro, Japanese yen, British pound, Swiss franc, and Australian and Canadian dollars.
Michigan Mayor
``I confess I've never heard banks charge interest to each other,' said James Fouts, the mayor of Warren, Michigan, a Detroit suburb of 130,000 that is home to several General Motors Corp. and Chrysler LLC plants. ``I'm frightened by the financial situation. Wall Street is exacerbating and accelerating a doomsday scenario.'
Corporate bank loans are often linked to three-month Libor rates. Libor also affects interest costs on credit cards, student loans and adjustable-rate mortgages. From 2004 to 2006, more than half of the U.S. subprime mortgages at the root of the financial crisis, or those issued to the least creditworthy borrowers, had adjustable rates linked to Libor, said Guy Cecala, publisher of Inside Mortgage Finance in Bethesda, Maryland.
Americans' lack of financial sophistication is a cause, not just a symptom, of the credit crunch, said James Bowers, managing director of the Center for Economic and Entrepreneurial Literacy, a nonprofit group in Washington. It may be a reason people are willing to take out loans for homes they can't afford or add to credit card debt at adjustable rates.
``When we go to a mechanic, we trust them to fix our problems,' he said. `
`But right now, the mechanics on Wall Street can't get their own cars to start.'
http://www.bloomberg.com/apps/news?pid=20601087&sid=ahZ4C6T_mjfk&refer=home
Public Debt:
Limit ~ $10,600 T
10/2 ~~ $10,148 T
New $10.6 Trillion debt ceiling.
#msg-30998680
Futures (3) + World Indices
http://www.cme.com/trading/dta/del/globex.html
http://money.cnn.com/data/premarket/
http://quotes.ino.com/exchanges/futboard/current/
- Has links for quotes and charts.
World Indices (2) Mini Charts
Updates every 60sec ~ Watch the dates!!
http://www.wwfn.com/commentary/oscharts.html
http://www.allstocks.com/markets/World_Charts/Asian_Stock_Markets/asian_stock_markets.html
Fed. Ops: 20.00B Matures this week.
Wed: 20.00B 28day
========================================================
Temp Ops:
=======================================================
Public Debt:
Limit ~ $10,600 T
10/2 ~~ $10,148 T
New $10.6 Trillion debt ceiling.
#msg-30998680
=========================================================
Fed:
http://www.ny.frb.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE
The Slosh Report:
http://www.gmtfo.com/RepoReader/OMOps.aspx
=========================================================
Very nice W@G /e
Fed. 3day Reverse RP -25.00B
http://www.ny.frb.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE
The Slosh Report:
http://www.gmtfo.com/RepoReader/OMOps.aspx
Wells Fargo acquiring Wachovia for $15.1 billion
Friday October 3, 7:22 am ET
Wells Fargo to acquire Wachovia for $15.1 billion in all-stock deal; ends Citigroup talks
SAN FRANCISCO (AP) -- Wells Fargo says it is acquiring Wachovia in an all-stock transaction worth about $15.1 billion, as Wachovia ends talks with rival suitor Citigroup.
The deal, announced Friday, comes amid a turbulent time for banks and financial firms as they grapple with the ongoing credit crisis, which led to the recent bankruptcy of Lehman Brothers Holdings Inc. and the failure of Washington Mutual.
Wachovia shareholders will receive 0.1991 shares of Wells Fargo for every share of Charlotte, N.C.-based Wachovia stock they own, valuing Wachovia Corp. at about $7 per share.
Wells Fargo & Co. will record merger and integration charges of about $10 billion, but says it expects earnings to be boosted within the first year after the acquisition closes. No government assistance is part of the deal terms.
Mauldin: The New President and the Global Landscape
by John Mauldin
October 02, 2008
In times of crisis, those with psychological fortitude discover opportunities that most people miss. A friend of mine in Houston tells me of unending piles of tree limbs broken down by the hurricane. The homeowner laments his disaster; the tree trimmer and the roofer order a new Mercedes. Most of the world sees a Wall St. meltdown. Buffett takes the opening to deploy billions from his cash hoard. They're all seeing the same thing, but they're reacting differently based on different visions of the future.
http://www.safehaven.com/article-11440.htm
Converted Organics announces sale of liquid organic fertilizer to growers in Southwest Division (COIN) 5.75 +0.12 : Co announces that it has commenced filling an order for 35,000 gallons of its Biolizer GP organic liquid fertilizer from growers in the Southwest Division, which includes Arizona, southern California and Mexico.
Public Debt: $10,024 T 9/30
Limit ~ $10,600 T
9/25 ~~ $9,849 T
New $10.6 Trillion debt ceiling.
#msg-30998680
Fed.1day Reverse Repo -25.00B
http://www.ny.frb.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE
The Slosh Report:
http://www.gmtfo.com/RepoReader/OMOps.aspx
8:49AM Bank of America: John Thain will become president of Global Banking, Securities and Wealth Mgmt (BAC) 38.13 : Thain will become president of Global Banking, Securities and Wealth Management in the combined company once the merger is completed. His responsibilities will include what is now in Global Corporate and Investment Banking and most of what is now in Global Wealth and Investment Management at Bank of America which will be merged with similar functions at Merrill Lynch. Co also announced that Brian Moynihan will continue as president of Global Corporate and Investment Banking at Bank of America until the merger, and will take on a key newly created enterprise-wide role effective immediately.
XLF: Components and weightings as of last Friday.
http://www.sectorspdr.com/spdr/composition/?symbol=XLF
JT_ Option
www.321gold.com/images/gold_bull.gif
just bracket the gif
Hello Dimension...links
http://www.bullandbearwise.com/
http://www.ny.frb.org/markets/omo/dmm/temp.cfm
http://www.ny.frb.org/markets/pomo/display/index.cfm
http://www.gmtfo.com/RepoReader/OMOps.aspx
http://www.treasurydirect.gov/NP/BPDLogin?application=np
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=32560169
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=32478274
Hope this helps old Pal.
I'm still a free member so can't pm
Fed. 1day Reverse RP -20.00B
http://www.ny.frb.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE
The Slosh Report:
http://www.gmtfo.com/RepoReader/OMOps.aspx
SNB completes planned gold sales, no more due
09.29.08, 6:31 AM ET
ZURICH, Sept 29 (Reuters) - The Swiss National Bank said on Monday it had concluded the sale of 250 tonnes of gold, announced in June 2007, and said it had no plans for any further gold sales.
The SNB said in a statement it sold 137 tonnes of gold between Sept. 27, 2007 and Sept 26., 2008 after selling 113 tonnes prior to that. It said its total gold holdings were now 1,040 tonnes, adding it planned no further reduction.
In June 2007, the SNB said it would sell 250 tonnes of gold by September 2009, in line with an agreement among European central banks to limit gold sales to 500 tonnes a year.
(Reporting by Emma Thomasson) Keywords: SWISS SNB/GOLD
tf.TFN-Europe_newsdesk@thomsonreuters.com
OT: JT_Options
www.321gold.com/images/gold_bull.gif
l am free member here.
Thanks & post your links here for all to see.
Gold~ Silver~ HUI~ XAU~ US$~ €uro~ Crude~Pd
Live Charts ~ Bookmark this page –
Refresh anytime during the day.
PoG
PoS
Pd
HUI
XAU
3day $US:
€uro
Crude (Nov)
Futures (3) + World Indices
http://www.cme.com/trading/dta/del/globex.html
http://money.cnn.com/data/premarket/
http://quotes.ino.com/exchanges/futboard/current/
- Has links for quotes and charts.
World Indices (2) Mini Charts
Updates every 60sec ~ Watch the dates!!
http://www.wwfn.com/commentary/oscharts.html
http://www.allstocks.com/markets/World_Charts/Asian_Stock_Markets/asian_stock_markets.html
W@G2 QQQQ 10/01/08 for a 10/03/08
40.95+/- Myself °¿° dibs #msg-32535729
39.50 Farooq
37.25 bob3
36.75 Kookiekook - Today's (9-30) gain in the DJIA was a typical temp rebound of 63% (Fibonacci)of yesterday's loss, The downward trend will continue tommorrow for at least for the rest of the week.
Fed.28day foward + 20.00B [so far
http://www.ny.frb.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE
The Slosh Report:
http://www.gmtfo.com/RepoReader/OMOps.aspx
Thanks Doc, posting auctions l only
report what has been injected....all this other stuff way over for me to keep track...btw don't forget to send Ben & Hank cards of cheer.
Fed. No Action today.
http://www.ny.frb.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE
The Slosh Report:
http://www.gmtfo.com/RepoReader/OMOps.aspx
OT: WB is my bank, l can get my $$/e
W@G1 QQQQ 09/29/08 for a 10/01/08 close
43.75 rayrohn
42.87 frenchee
42.55 bob3
Behind Insurer's Crisis, Blind Eye to a Web of Risk
By Gretchen Morgenson
The New York Times
Sunday, September 28, 2008
"It is hard for us, without being flippant, to even see a scenario within any kind of realm of reason that would see us losing one dollar in any of those transactions."
-- Joseph J. Cassano, a former AIG executive, August 2007.
http://www.nytimes.com/2008/09/28/business/28melt.html?_r=1&hp&o
Two weeks ago the nation's most powerful regulators and bankers huddled in the Lower Manhattan fortress that is the Federal Reserve Bank of New York, desperately trying to stave off disaster.
As the group, led by Treasury Secretary Henry M. Paulson Jr., pondered the collapse of one of America's oldest investment banks, Lehman Brothers, a more dangerous threat emerged: American International Group, the worldâ??s largest insurer, was teetering. AIG needed billions of dollars to right itself and had suddenly begged for help.
The only Wall Street chief executive participating in the meeting was Lloyd C. Blankfein of Goldman Sachs, Mr. Paulson's former firm. Mr. Blankfein had particular reason for concern.
Although it was not widely known, Goldman, a Wall Street stalwart that had seemed immune to its rivals' woes, was AIG's largest trading partner, according to six people close to the insurer who requested anonymity because of confidentiality agreements. A collapse of the insurer threatened to leave a hole of as much as $20 billion in Goldman's side, several of these people said.
Days later, federal officials, who had let Lehman die and initially balked at tossing a lifeline to AIG, ended up bailing out the insurer for $85 billion.
Their message was simple: Lehman was expendable. But if AIG unspooled, so could some of the mightiest enterprises in the world.
A Goldman spokesman said in an interview that the firm was never imperiled by AIG's troubles and that Mr. Blankfein participated in the Fed discussions to safeguard the entire financial system, not his firm's own interests.
Yet an exploration of AIG's demise and its relationships with firms like Goldman offers important insights into the mystifying, virally connected -- and astonishingly fragile -- financial world that began to implode in recent weeks.
Although America's housing collapse is often cited as having caused the crisis, the system was vulnerable because of intricate financial contracts known as credit derivatives, which insure debt holders against default. They are fashioned privately and beyond the ken of regulators -- sometimes even beyond the understanding of executives peddling them.
Originally intended to diminish risk and spread prosperity, these inventions instead magnified the impact of bad mortgages like the ones that felled Bear Stearns and Lehman and now threaten the entire economy.
In the case of AIG, the virus exploded from a freewheeling little 377-person unit in London, and flourished in a climate of opulent pay, lax oversight, and blind faith in financial risk models. It nearly decimated one of the worldâ??s most admired companies, a seemingly sturdy insurer with a trillion-dollar balance sheet, 116,000 employees and operations in 130 countries.
"It is beyond shocking that this small operation could blow up the holding company," said Robert Arvanitis, chief executive of Risk Finance Advisors in Westport, Conn. "They found a quick way to make a fast buck on derivatives based on AIG's solid credit rating and strong balance sheet. But it all got out of control."
... The London Office
The insurance giant's London unit was known as AIG Financial Products, or AIGFP. It was run with almost complete autonomy, and with an iron hand, by Joseph J. Cassano, according to current and former AIG employees.
A onetime executive with Drexel Burnham Lambert -- the investment bank made famous in the 1980s by the junk bond king Michael R. Milken, who later pleaded guilty to six felony charges -- Mr. Cassano helped start the London unit in 1987.
The unit became profitable enough that analysts considered Mr. Cassano a dark horse candidate to succeed Maurice R. Greenberg, the longtime chief executive who shaped AIG in his own image until he was ousted amid an accounting scandal three years ago.
But last February, Mr. Cassano resigned after the London unit began bleeding money and auditors raised questions about how the unit valued its holdings. By Sept. 15, the unit's troubles forced a major downgrade in AIG's debt rating, requiring the company to post roughly $15 billion in additional collateral -- which then prompted the federal rescue.
Mr. Cassano, 53, lives in a handsome, three-story town house in the Knightsbridge neighborhood of London, just around the corner from Harrods department store on a quiet square with a private garden.
He did not respond to interview requests left at his home and with his lawyer. An AIG spokesman also declined to comment.
At AIG Mr. Cassano found himself ensconced in a behemoth that had a long and storied history of deftly juggling risks. It insured people and properties against natural disasters and death, offered sophisticated asset management services and did so reliably and with bravado on many continents. Even now its insurance subsidiaries are financially strong.
When Mr. Cassano first waded into the derivatives market, his biggest business was selling so-called plain- vanilla products like interest rate swaps. Such swaps allow participants to bet on the direction of interest rates and, in theory, insulate themselves from unforeseen financial events.
Ten years ago a "watershed" moment changed the profile of the derivatives that Mr. Cassano traded, according to a transcript of comments he made at an industry event last year. Derivatives specialists from J.P. Morgan, a leading bank that had many dealings with Mr. Cassano's unit, came calling with a novel idea.
Morgan proposed the following: AIG should try writing insurance on packages of debt known as "collateralized debt obligations." CDOs were pools of loans sliced into tranches and sold to investors based on the credit quality of the underlying securities.
The proposal meant that the London unit was essentially agreeing to provide insurance to financial institutions holding CDOs and other debts in case they defaulted -- in much the same way some homeowners are required to buy mortgage insurance to protect lenders in case the borrowers cannot pay back their loans.
Under the terms of the insurance derivatives that the London unit underwrote, customers paid a premium to insure their debt for a period of time, usually four or five years, according to the company. Many European banks, for instance, paid AIG to insure bonds that they held in their portfolios.
Because the underlying debt securities -- mostly corporate issues and a smattering of mortgage securities -- carried blue-chip ratings, AIG Financial Products was happy to book income in exchange for providing insurance. After all, Mr. Cassano and his colleagues apparently assumed, they would never have to pay any claims.
Since AIG itself was a highly rated company, it did not have to post collateral on the insurance it wrote, analysts said. That made the contracts all the more profitable.
These insurance products were known as "credit default swaps," or CDSs in Wall Street argot, and the London unit used them to turn itself into a cash register.
The unit's revenue rose to $3.26 billion in 2005 from $737 million in 1999. Operating income at the unit also grew, rising to 17.5 percent of AIG's overall operating income in 2005, compared with 4.2 percent in 1999.
Profit margins on the business were enormous. In 2002, operating income was 44 percent of revenue; in 2005, it reached 83 percent.
Mr. Cassano and his colleagues minted tidy fortunes during these high-cotton years. Since 2001, compensation at the small unit ranged from $423 million to $616 million each year, according to corporate filings. That meant that on average each person in the unit made more than $1 million a year.
In fact, compensation expenses took a large percentage of the unit's revenue. In lean years it was 33 percent; in fatter ones 46 percent. Over all, AIG Financial Products paid its employees $3.56 billion during the last seven years.
The London unit's reach was also vast. While clients and counterparties remain closely guarded secrets in the derivatives trade, Mr. Cassano talked publicly about how proud he was of his customer list.
At the 2007 conference he noted that his company worked with a "global swath" of top-notch entities that included "banks and investment banks, pension funds, endowments, foundations, insurance companies, hedge funds, money managers, high-net-worth individuals, municipalities, and sovereigns and supranationals."
Of course, as this intricate skein expanded over the years, it meant that the participants were linked to one another by contracts that existed for the most part inside the financial world's version of a black box.
Goldman Sachs was a member of AIG's derivatives club, according to people familiar with the operation. It was a customer of AIG's credit insurance and acted as an intermediary for trades between AIG and its other clients.
Few knew of Goldman's exposure to AIG When the insurer's flameout became public, David A. Viniar, Goldman's chief financial officer, assured analysts on Sept. 16 that his firm's exposure was "immaterial," a view that the company reiterated in an interview.
Later that same day, the government announced its two-year, $85 billion loan to AIG, offering it a chance to sell its assets in an orderly fashion and theoretically repay taxpayers for their trouble. The plan saved the insurer's trading partners but decimated its shareholders.
Lucas van Praag, a Goldman spokesman, declined to detail how badly hurt his firm might have been had AIG collapsed two weeks ago. He disputed the calculation that Goldman had $20 billion worth of risk tied to AIG, saying the figure failed to account for collateral and hedges that Goldman deployed to reduce its risk.
Regarding Mr. Blankfein's presence at the Fed during talks about an AIG bailout, he said: "I think it would be a mistake to read into it that he was there because of our own interests. We were engaged because of the implications to the entire system."
Mr. van Praag declined to comment on what communications, if any, took place between Mr. Blankfein and the Treasury secretary, Mr. Paulson, during the bailout discussions.
A Treasury spokeswoman declined to comment about the AIG rescue and Goldman's role. The government recently allowed Goldman to change its regulatory status to help bolster its finances amid the market turmoil.
... An Executive's Optimism
Regardless of Goldman's exposure, by last year, AIG Financial Products' portfolio of credit default swaps stood at roughly $500 billion. It was generating as much as $250 million a year in income on insurance premiums, Mr. Cassano told investors.
Because it was not an insurance company, AIG Financial Products did not have to report to state insurance regulators. But for the last four years, the London-based unit's operations, whose trades were routed through Banque AIG, a French institution, were reviewed routinely by an American regulator, the Office of Thrift Supervision.
A handful of the agencyâ??s officials were always on the scene at an AIG Financial Products branch office in Connecticut, but it is unclear whether they raised any red flags. Their reports are not made public and a spokeswoman would not provide details.
For his part, Mr. Cassano apparently was not worried that his unit had taken on more than it could handle. In an August 2007 conference call with analysts, he described the credit default swaps as almost a sure thing.
"It is hard to get this message across, but these are very much handpicked," he assured those on the phone.
Just a few months later, however, the credit crisis deepened. AIG Financial Products began to choke on losses -- though they were only on paper.
In the quarter that ended Sept. 30, 2007, AIG recognized a $352 million unrealized loss on the credit default swap portfolio.
Because the London unit was set up as a bank and not an insurer, and because of the way its derivatives contracts were written, it had to put up collateral to its trading partners when the value of the underlying securities they had insured declined. Any obligations that the unit could not pay had to be met by its corporate parent.
So began AIG's downward spiral as it, its clients, its trading partners, and other companies were swept into the drowning pool set in motion by the housing downturn.
Mortgage foreclosures set off questions about the quality of debts across the entire credit spectrum. When the value of other debts sagged, calls for collateral on the securities issued by the credit default swaps sideswiped AIG Financial Products and its legendary, sprawling parent.
Yet throughout much of 2007, the unit maintained that its risk assessments were reliable and its portfolios conservative. Last fall, however, the methods that AIG used to value its derivatives portfolio began to come under fire from trading partners.
In February, AIG's auditors identified problems in the firm's swaps accounting. Then, three months ago, regulators and federal prosecutors said they were investigating the insurer's accounting.
This was not the first time AIG Financial Products had run afoul of authorities. In 2004, without admitting or denying accusations that it helped clients improperly burnish their financial statements, AIG paid $126 million and entered into a deferred prosecution agreement to settle federal civil and criminal investigations.
The settlement was a black mark on AIG's reputation and, according to analysts, distressed Mr. Greenberg, who still ran the company at the time. Still, as Mr. Cassano later told investors, the case caused AIG to improve its risk management and establish a committee to maintain quality control.
"That's a committee that I sit on, along with many of the senior managers at AIG, and we look at a whole variety of transactions that come in to make sure that they are maintaining the quality that we need to," Mr. Cassano told them. "And so I think the things that have been put in at our level and the things that have been put in at the parent level will ensure that there won't be any of those kinds of mistakes again."
At the end of AIG's most recent quarter, the London unit's losses reached $25 billion.
As those losses mounted, and AIG's once formidable stock price plunged, it became harder for the insurer to survive -- imperiling other companies that did business with it and leading it to stun the Federal Reserve gathering two weeks ago with a plea for help.
Mr. Greenberg, who has seen the value of his personal AIG holdings decline by more than $5 billion this year, dumped five million shares late last week. A lawyer for Mr. Greenberg did not return a phone call seeking comment.
For his part, Mr. Cassano has departed from a company that is a far cry from what it was a year ago when he spoke confidently at the analyst conference.
"We're sitting on a great balance sheet, a strong investment portfolio, and a global trading platform where we can take advantage of the market in any variety of places," he said then. "The question for us is: Where in the capital markets can we gain the best opportunity, the best execution for the business acumen that sits in our shop?"
http://www.nytimes.com/2008/09/28/business/28melt.html?_r=1&hp&o
Earnings Calendar for the Week Ahead
B = Before-Market Hours
D = During-Market Hours
A = After-Market Hours
REPORTS TO BE ANNOUNCED FOR WEEK OF SEP 29 - OCT 3
#msg-32485943
Courtesy...Bullwinkle
Fed. Ops: 25.00B Matures this week.
Public Debt limit will need togo higher!
Wed: 20.00B 28day
Thu: 5.00B 14day
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Temp Ops:
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Public Debt:
Limit ~ $10,600 T
9/25 ~~ $9,849 T
New $10.6 Trillion debt ceiling.
#msg-30998680
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Fed:
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Pentagon bill poised to clear Senate hurdle
Sep 27, 7:32 AM (ET)
By ANDREW TAYLOR
WASHINGTON (AP) - A huge spending bill that combines help for Gulf Coast disaster victims and loans for U.S. automakers with record spending for the Pentagon and veterans is poised to clear a key hurdle in the Senate.
The year-end budget measure also would lift a quarter-century ban on oil drilling off the Atlantic and Pacific coasts. That's a key victory for Republicans.
Saturday's vote on a procedural motion would set a final vote for no later than Sunday.
After hard lobbying, automakers won up to $25 billion in low-interest loans to help them develop technologies and retool factories to meet new standards for cleaner, more fuel-efficient cars.
The measure is fueled by a need to pass stopgap funding to keep the government running past the current budget year ending Sept. 30. The stopgap measure is needed because of a breakdown in the budget process this year, and under it, domestic agencies would be funded through March 6 or until their regular budgets pass.
The measure is dominated by $488 billion for the Pentagon, $40 billion for the Homeland Security Department and $73 billion for veterans' programs and military base construction projects - amounting to about 60 percent of the budget work Congress must pass each year.
The budget legislation is the result of months of wrangling between Democrats who control Congress and the lame-duck Bush administration and its allies on Capitol Hill. The administration won approval of the defense budget while Democrats wrested concessions from the White House on disaster aid, heating subsidies for the poor and smaller spending items.
The lifting of the offshore oil drilling moratorium does not mean drilling is imminent. But it could set the stage for the government to offer leases in some Atlantic federal waters as early as 2011.
The legislation also contains 2,322 pet projects totaling $6.6 billion, according to Taxpayers for Common Sense, a watchdog group. That included 2,025 in the defense portion alone that cost a total of $4.9 billion.
Thanks guys, nice wag'n /e
Chichi2, updated Goldsilver collage crude
front month Nov.
My post # 31998 or reply to
Fed.(2) 3day Reverse RP -6.00B [drain]
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The Slosh Report:
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Fed.3day Reverse RP -20.00B [Drain]
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Open Letter To Congress On The $700 Billion Paulson Bailout Plan
Dear Congress
Treasury Secretary Paulson is asking you to rush through a $700 billion package because "we’re literally maybe days away from a complete meltdown of our financial system".
Paulson states that it must be done quickly and that it is better than the alternatives. Fed Chairman Bernanke agrees.
http://globaleconomicanalysis.blogspot.com/2008/09/open-letter-to-congress-on-700-billion.html