Archive for the ‘markets’ Category

Toxic Geithner Almosts Ready With Toxic Asset Plan for Banks

March 21, 2009

Treasury Secretary Timothy Geithner is putting the finishing touches on a plan to get toxic assets off the books of the country’s struggling banks, according to administration and industry officials. The plan could be announced as soon as Monday, they said.

By Martin Crutsinger, Ap Economics Writer

Geithner’s proposal will employ the resources of the Federal Reserve and the Federal Deposit Insurance Corp. to make the government’s $700 billion financial rescue fund go further, these officials said Friday.

The Fed and the FDIC are being tapped for support because the prospects for getting additional money from Congress for the bailout effort have dimmed significantly with this week’s uproar over millions of dollars in bonuses provided to troubled insurance giant American International Group Inc.

The officials, who spoke on condition of anonymity because they were not authorized to speak publicly about Geithner’s plan, said it will have three major parts. One part will be an effort Geithner spoke about last month which would be the creation of a public-private partnership to back purchases of bad assets by private investors.

A second part of the plan will expand a recently launched program being run by the Federal Reserve called the Term Asset-Backed Securities Loan Facility, or TALF. That program is providing loans for investors to buy assets backed by consumer debt in an effort to make it easier for consumers to get auto, student and credit card loans. Under Geithner’s proposal, this program would be expanded to support investors’ purchases of banks’ toxic assets.

The third part of the Geithner plan would utilize the resources of the FDIC, the agency that guarantees bank deposits, to purchase toxic assets.

When Geithner announced the administration’s overhaul of the troubled financial rescue program on Feb. 10, it was widely panned by investors with the Dow Jones industrial average plunging by 380 points.

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Economic Abyss could deepen again

March 12, 2009

A deepening pessimism is taking root in the American economy as joblessness rises inexorably toward 9 percent, businesses are failing, U.S. exports have tanked and Wall Street is in a depression.

Obama: Playing not to lose

Billionaire investor Warren Buffet declares the economy has “fallen off a cliff,” and sees recovery further off than ever. Economists talk gloomily of a long recession followed by years of anemic growth as the once-mighty global economy shrinks for the first time since World War II.

Donald Lambro
The Washington Times

The administration’s plans to bail out failing banks, buy worthless toxic assets and “jump start” a listless economy now seem tame in the face of a dawning realization that the fierce financial infection is far more systemic than they had first imagined.

Global economic analysts here now talk of bank failures in the trillions of dollars, dwarfing the rapidly depleting $350 billion in TARP rescue funds that the Treasury has at its disposal. The Federal Deposit Insurance Corp. is raising its premiums on the nation’s banks to replenish its shrinking fund at a time when many banks are too weak to pony up more money.

President Obama‘s honeymoon, if he ever really had one, is being cut short by new criticism from Wall Street, Republicans and Democrats in Congress and, increasingly, the business community.

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Obama Wasting America’s Strategic World Power; China Surges Despite Economy

Obama’s three-pronged economic strategy: delay, delay and delay

China Buying Oil, Uranium, Gold, Other Products At Bargain Prices

Pelosi’s Stimulus II? Lawmakers Propose No Cost, High Employment Energy Package

China Buying Oil, Uranium, Gold, Other Products At Bargain Prices

Russia, “Desperate For Cash,” Sells Oil to China In “Very Bad Deal”
Even Democrats Showing Signs Of Economic Despair, Worry at White House Inertia

Pelosi: Congress Needs to ‘Keep the Door Open’ to Second Stimulus Package

Government Struggling to Keep Up With Job Losses; “Stimulus” Too Late

March 8, 2009

The nation’s rapid job losses could be piling up too quickly for the government to keep up, the Washington Post reported.

From Fox News

With the unemployment rate jumping to 8.1 percent last month, the government is facing increasing pressure to take action.

But analysts warn that actions taken so far to stabilize the economy haven’t been enough.

The stimulus package was designed to “save or create” 3.5 million jobs, but the nation has already passed that with 4.4 million jobs having been lost.

“It’s premature to say we need another stimulus, but the economy is performing much worse than when [the law] was signed, and the odds are increasing that we’ll need a bigger policy response,” Mark Zandi of Moody’s told the Post. “What we’ve learned is policy has been a step behind this whole downturn. It’s important to get a step ahead.”

And others say the government hasn’t yet grappled with the scope of the problem.

“I think what it shows is neither the government nor many economists have a grasp yet of how bad the economy really is right now,” Bernard Baumohl, chief global economist at the Economic Outlook Group, told the Post. “We can’t get our arms around what’s going on.”

On Friday, the Labor Department reported the nation’s unemployment rate had bolted to 8.1 percent in February, the highest since late 1983, as cost-cutting employers slashed 651,000 jobs amid a deepening recession.

The net loss of 651,000 jobs came after even deeper payroll reductions in the prior two months, according to revised figures released Friday. The economy lost 681,000 jobs in December and another 655,000 in January.

The president wouldn’t say in an interview posted on The New York Times’ Web site Saturday whether the economy will be growing again by year’s end. He said that timing depends on several factors. Notable among them was his call for other countries to take actions to shore up their financial markets and coordinate those actions with the U.S.

The Associated Press contributed to this report.

Obama Doesn’t Understand What Many Americans Are Thinking

Global Economy Weakness Leading To Social Unrest

NYT Interviews Obama; No Economic Recovery This Year

 NYT: After March 6 Economic News, “2009 is Probably a Lost Cause”

Dow’s Decline Is Fastest for a New President in Nearly a Century

March 6, 2009

The Dow Jones Industrial Average has fallen faster under President Obama than under any new president in at least 90 years, according to a review conducted by Bloomberg. 

Bloomberg reports that since Inauguration Day, the Dow has fallen 20 percent, leading at least one investor to dub this the “Obama bear market.” The Dow has also dropped 31 percent since Election Day. 

Despite a string of government bailout offers and Obama’s advice earlier this week that Americans should be buying stock while shares are low, the Dow has continued to freefall. 

Bloomberg reported that Obama is at risk of breaking a historical trend — in which the Dow soars an average of close to 10 percent in the first year after a Democrat wins the presidency. 

–Fox News


By Eric Martin

March 6 (Bloomberg) — President Barack Obama now has the distinction of presiding over his own bear market.

The Dow Jones Industrial Average has fallen 20 percent since Inauguration Day, the fastest drop under a newly elected president in at least 90 years, according to data compiled by Bloomberg. The gauge has lost 53 percent from its October 2007 record of 14,164.53, slipping 4.1 percent to 6,594.44 yesterday.

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NYT: After March 6 Economic News, “2009 is Probably a Lost Cause”

Geithner’s Top Two Treasury Assistants Withdraw; 17 Unfilled Top Jobs At U.S. Treasury

March 6, 2009

President Obama said that Timothy Geithner was “indispensible” in solving the nation’s economic crisis.  He was confirmed by the Senate as treasury Secretary despite his own personal tax irregularities.

His first outing as Treasury Secretary was panned by economic analysts and observers.

And now he can’t get anyone to join his team at Treasury.

Geither’s top two picks to fill senior treaury jobs have withdrawn their names from consideration and there are 17 unfilled and unnamed top jobs at Treasury.

Time to re-think Mr. Geithner?

Treasury Secretary Timothy Geithner appears before the Senate ... 
Treasury Secretary Timothy Geithner appears before the Senate Finance Committee on Capitol Hill in Washington, Wednesday, March 4, 2009, to defend President Barack Obama’s fiscal 2010 federal budget. (AP Photo/J. Scott Applewhite)


By John Poirier and David Lawder
Two top contenders for senior posts at the U.S. Treasury have withdrawn, people familiar with the moves said on Thursday, dealing a blow to Treasury Secretary Timothy Geithner’s efforts to build his staff to fight the financial crisis.

Former Securities and Exchange Commissioner Annette Nazareth withdrew from consideration to become deputy Treasury secretary for personal reasons to remain in her private securities law practice, one of the sources said.

Caroline Atkinson, Geithner’s choice for international affairs undersecretary, also has withdrawn. Atkinson, a senior official at the International Monetary Fund, has decided to remain at the institution, a person familiar with the decision said.

Both Nazareth and Atkinson had been vetted for the jobs but were not formally nominated for U.S. Senate confirmation.

The withdrawals come as Geithner is trying to boost market confidence in the Obama administration’s ability to battle the worst financial crisis since the Great Depression.

He is working with a close circle of advisers and civil servants to craft new bailouts and flesh out details of an effort to purchase troubled assets from banks as financial stocks are back under attack.

Nazareth and Atkinson could not immediately be reached for comment.

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From The American Spectator:

“People think Wall Street and our economy are in a mess? They have nothing on what we’re going through here,” said a career Treasury Department official after learning yesterday that former U.S. Securities and Exchange Commission member Annette Nazareth had withdrawn from consideration to serve as deputy Treasury secretary.

Senior White House officials were telling reporters on background last night that Nazareth withdrew from consideration because initial feedback from the Senate on her possible nomination was that she would endure a tough confirmation process due to her role at the SEC directing oversight of market regulation. But associates of Nazareth familiar with the situation say that there were other reasons for her to pull out. “She simply lost confidence in [Treasury Secretary Timothy] Geithner,” says a colleague of Nazareth’s at the law firm, Davis Polk & Wardwell. “There’s a lot of that going around, we hear.”

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 Most Obama “Economic Advisors” Raised Money for Democrats

 Obama’s Economic Strategy Akin To LBJ’s Vietnam Fiasco: “Pour In More”
 Unemployment Highest Since 1983; Business Leaders Have No Confidence in Obama Economic Plan, Team

Cheney on Auto Bailout Failure: It’s ‘Herbert Hoover’ time

December 12, 2008

Senate Republicans’ dramatic revolt against a White House-backed auto industry rescue plan is fraught with political risk.

While the high-stakes gambit places them squarely within the mainstream of anti-bailout public sentiment, at the same time it exposes the party to potentially devastating criticism that its failure to compromise doomed the Big Three automakers and deepened the economic recession.

Republicans argue that their rejection Thursday evening of a $14 billion loan package came in response to the concerns of angry taxpayers who are unwilling to pay for an auto industry bailout on the heels of October’s $700-billion financial bailout package.

By Manu Raju, Politico

Auto bailout 

Above: Lawmakers in a car wreck.  Photo by Associated Press

“I think it would appear that the people who voted against this are carrying out the will of the voters as expressed through the phone calls to our offices,” said Sen. Charles Grassley (R-Iowa).

But that sentiment betrays the deep rifts the issue has revealed within the party, pitting Rust Belt and auto-state senators who joined Democrats in a plea for federal aid against their Southern colleagues who represent states where foreign-owned automakers constitute a significant economic presence. All of this takes place against the backdrop of an intraparty debate over whether the GOP has lost its core value of limited government.

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Global shares dive on US car deal collapse

December 12, 2008

Shares in London plummeted by nearly 180 points today, following the failure of US carmakers to secure a $14 billion rescue fund from the Government, raising the prospect that Chrysler and General Motors could file for bankruptcy within days.

The FTSE 100 index of leading shares tumbled 179 points to 4,209.49 as details of the US Senate’s refusal to back the bailout deal emerged. London shares followed Asia markets lower, with Japan’s Nikkei 225 Index, briefly falling over 7 per cent on massive selling of Toyota, Honda, Nissan and the other domestic automakers.

The Hang Seng plummeted nearly 7 per cent while the China Enterprises Index of mainland stocks dived 8 per cent. Asia investors are fearful that the market will become flooded with cheap US cars if America’s “Big Three” go bust after the Senate effectively threw out a $14 billion emergency bailout bill.

Pain was felt across Europe where stocks tanked, with Germany’s Dax down 3.9 per cent dragged lower by local carmakers, BMW, Daimler and Porsche. While in France, the CAC index fell 4.3 per cent on Renault and Peugeot’s tumbling shares.

From the Times (UK)

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Unexpected Drop in China’s Imports and Exports

December 10, 2008

China’s exports fell for the first time in seven years, the government reported Wednesday, sliding 2.2 percent in November and providing stark evidence that the global financial crisis has arrived here in earnest.

In October, by contrast, exports had surged 19.2 percent.

Imports also plunged sharply last month, falling 17.9 percent and widening the trade surplus to $40 billion, from $35.2 billion in October.

Taken together, the trade figures will be bracing to those who had viewed China as a potential savior for the slumping economies of the Europe, Japan and the United States.

“We were expecting a slowdown but the magnitude is a bit shocking,” Wang Tao, an analyst at UBS Securities, said.

The figures, together with further signs of a sagging economy in Japan, paint a picture of economic gloom spreading across Asia — even if much of the region will suffer from a less severe downturn than the United States and Europe.

By Andrew Jacobs
The New York Times

Aly Song/Reuters

A man rode a bicycle past containers at a port in Shanghai on Wednesday.

The worrisome developments will put added pressure on the Chinese government, which only last month announced a $586 billion stimulus package aimed at cushioning the effects of the global slowdown. In recent weeks, the government has reduced interest rates and taxes on stock trades and announced other measures aimed at lifting domestic consumption.

In a report broadcast on China National Radio after the trade figures were released, the government vowed to expand spending and cut taxes next year in an effort to spur job creation and bolster agriculture, social security, education and small and medium-size enterprises.

Beijing will also seek to ensure “healthy and stable” growth of the nation’s property markets, which has slowed sharply in recent months.

In another batch of sobering news, the government said that direct foreign investment fell 36.5 percent from a year earlier and that the producer price index, a measure of inflation at the factory level, had fallen to its lowest rate in two years. That figure, 2 percent in November, was 6.6 percent a month earlier. In August, when that number hit 10.1 percent, the government was focused on stemming the threat of inflation.

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Obama’s Challenge: How do you tackle a confluence of crises?

December 9, 2008

US economic activity is collapsing so fast that it is hard to keep up with just how bad things are. The various monthly data releases are ancient history by the time they are published, even the most up-to-date ones.

This was scarily underlined by last Friday’s employment report. The headline number – a loss of more than half a million jobs in November, the largest decline in more than 30 years – was frightening enough, but revisions to the previous two months’ numbers added another 200,000 jobs lost to the previously estimated 500,000 combined.

The very rough and rapidly-being-overtaken-by-events estimate on Wall Street is that gross domestic product in this quarter will have declined at an annual rate of about 3 per cent. That would be a much faster rate of shrinkage than anything seen in the two recessions of 1991 and 2001. If there is any silver lining to be found to this misery, it might be the very speed at which the data are imploding.

Some economists are becoming disturbed by the similarities between the United States today and Japan in the 1990s. Having experienced both at first hand, I am struck more by the differences.

The Japanese depression was a slow-motion affair. It went on for the best part of a decade. Over that time, GDP rarely fell in any quarter by more than 1 per cent; unemployment grew very slowly. It was economic stagnation rather than collapse; that’s partly why it went on so long. It was almost oddly tolerable: not too much concentrated hardship, just extended and broadly spread malaise.

America, in a fashion characteristic of a more dynamic, flexible – but also less socially protected – economy, is descending much more rapidly, but perhaps will get over it more quickly.

The US-Japanese difference is reflected in the response by the private and public sectors to the crisis. Japanese banks were notoriously slow to face up to their bad assets and slower still to do the necessary consolidation. US banks, while far from perfect, have been quicker to mark their problems to what looks vaguely like market value.

The policy response in the United States has been swift and aggressive. The Federal Reserve has cut interest rates in a year by more than the Bank of Japan did in five. The hefty injections of cash into the financial system in the past year contrast sharply with the dilatory, policymaking-by-denial approach taken by the Japanese Ministry of Finance.

But here is the bad news. I put all this at the weekend to an esteemed former Fed official, who has made detailed studies of the Japanese and US crises. He was unpersuaded. In fact, he seemed to think that the depth of the US downturn would not necessarily mean that it would be significantly shorter. Sadly, this makes a sort of grim sense if you think about it.

The US today is not just facing a horrendous credit crunch. It seems to be confronted with a miserable confluence of crises, all coming to a head at the same time: the housing collapse, financial market distress, the credit drought, a global economic slump and a final, unwelcome rebalancing of its long domestic savings/investment dysfunction.

On top of all this, the US Government is in its quadrennial state of stasis caused by the long handover between presidents.

By .
Barack Obama seems at least to be under no illusions about how bad things are. Prodded by Larry Summers, who missed out on a second tour at the Treasury but seems very likely to be playing an active, broad-ranging advisory role at the White House, he has wisely decided to go for broke. Mr Summers has been publicly and privately urging a huge fiscal stimulus for some time and the outline announced by the President-elect at the weekend seems to fit the bill. An injection of more than $500 billion (£340 billion) over the next year and a half is probably the minimum needed. Now the debate will focus on the composition of the stimulus.

President-elect Barack Obama answers a journalist's question ...


In the Bush years the various stimulus packages focused on tax cuts, specifically rebates for taxpayers that were thought likely to increase spending. The effect was mixed, at best. In 2001, it looks as though there was some benefit from the rebates as consumers spent part of them, but last year’s rebates were almost completely ineffective. Americans, confronted with huge declines in the value of their household assets, simply used the extra cash to help to rebuild their balance sheets a little.

What is needed now is a direct impulse to spending. The President-elect is proposing an old-fashioned Keynesian public spending plan – with a modern twist. As well as spending on roads and the usual transport projects, he wants Congress to approve money for green and information technology-based infrastructure. Meanwhile, many Democrats want to pour money into the flailing car industry. And some sort of tax relief is also in the works – at least a suspension of the tax increases for the wealthy that Mr Obama proposed during the campaign.

It might be called a kitchen-sink approach – throwing everything you can at the problem. It is not pretty. But nobody has a better plan at the moment.

Japanese economy shrinks at faster rate than feared
Obama’s Many “Number One” Priorities

Japanese economy shrinks at faster rate than feared

December 9, 2008

The Japanese economy, the world’s second largest,  contracted at a far faster pace than expected in the third quarter

 By Julian Ryall in Tokyo
The Telegraph (UK)

An electronic share price board is seen in central Tokyo. Japan ...

An electronic share price board is seen in central Tokyo. Japan sank deeper into recession than previously thought in the third quarter as firms slashed investment to cope with the financial crisis, official figures have shown.(AFP/File/Kazuhiro Nogi)
The economy shrank 1.8pc on an annualised basis, steeper than the 0.4 percent the government had predicted, with the blame pinned on drastically reduced capital expenditure and reduced inventories.

“When GDP drops by five times more than you were expecting, that will set the alarm bells ringing,” said Martin Schulz, senior economist at the Fujitsu Research Institute.

“We are now seeing the downturn affecting the real economy and there are big problems, although not as bad as we see in Europe,” he said.

Japanese companies are earning less from their overseas operations, but domestic demand has not “nose-dived,” as it has in Europe, because employees here are confident their companies will ride out the economic storm. Household spending rose a marginal 0.3pc from the previous quarter, one of the few bright spots in the data.

In Europe, in comparison, “consumers have gone on strike,” Schulz said.

Still, the figures will come as a major blow to Japanese corporations and the government.

Capital spending declined 2pc on the quarter, up from a predicted 1.7pc slump. Economists predict those figures are likely to be replicated in the next quarter.

Sony has also announced that it is cutting 8,000 jobs, reducing its investments and withdrawing from unprofitable businesses as part of its restructuring efforts.

The Bank of Japan is due to issue its Tankan report on corporate sentiment next week, with experts predicting that large manufacturers will be the most pessimistic about the outlook for more than three decades.

The bad economic news was repeated in China, where the growth in output was up 7.2pc in November, the weakest growth in nine years as the economy weakens.

 U.S. needs missile defense now more than ever

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