Reactions to story from The New York Times

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  Links 10/13/08

  http://www.nakedcapitalism.com/2008/10/links-101308.html
  51 days ago in naked capitalism · Authority: 1,816

  Does Driving Slower Save Gas? Truck and Barter What the Troopergate Report Really Says Nathan Thornburgh, Time Will the votes be counted accurately? Guardian Iraqi government fuels 'war for oil' theories by putting reserves up for biggest ever sale
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  Cause for caution

  http://www.laobserved.com/biz/2008/10/cause_for_caution.php
  50 days ago in LA Biz Observed: Business news and commentary by Mark Lacter · Authority: 63

  "We are going up," says one of the CNBC anchors at the opening bell. "For now," adds another. There's already a lot of doubt about whether today's action is the beginning of things to come. The LAT's Tom Petruno puts it this way: When the stock market goes on sale, smart investors are supposed to seize the opportunity. But Wall Street's decline of the last three weeks has been so drastic, it has left even veteran money managers too afraid to step up. Aren't stocks cheap yet? Nearly everyone agrees that, on paper, they are, with major indexes such as the Dow Jones industrials now at five-year lows and down more than 40% from a year ago. Yet instead of attracting bargain-hunters, lower prices have had the opposite effect: Stocks have crumbled so quickly recently that many potential buyers have been driven back to the sidelines. The real question is not the stock market but the credit market. And NYT columnist Floyd Norris says there's no assurance that the weekend's frantic maneuvering by the world’s major bankers and finance ministers will work. In an effort to get credit moving, European leaders on Sunday promised to guarantee new loans to banks, which have stopped lending to one another as the crisis has deepened. But they left it up to each nation’s government to provide details of how its own banking system would be protected. Australia also announced such guarantees, but there was no similar announcement from the United States, where officials declined to say what action, if any, they would take. The Dow is up 365 points in the first few minutes of trading. Volume is expected to be low because of the Columbus Day holiday.
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  Neigh, I Say... Neigh

  http://nycweboy.typepad.com/my_weblog/2008/10/neigh-i-say-ne...
  50 days ago in weboy · Authority: 36

  I am, by nature a contrarian horse. I am a naysayer. Find me a problem, and I'll find out why your solution is probably not the right idea. People point this out to me as if I didn't know it about myself. I do, and I try to fight it. But... partly, I'm often right about the stuff I'm saying nay to. I have to say about the new version of the bank bailout - this is the one where, now, we solve everything by having governments pour money directly into the banks and guarantee interbank loans - that I'm really in unfamiliar territory. Mostly I don't know what to think. But one thing came to mind over the weekend. You guessed it... nay. From the beginning - and it's worth remembering, the "beginning" of these problems was more than a year ago - people have been trying to identify just what we're dealing with. It's a mortgage crisis. It's a credit crisis. It's a banking crisis. It's a liquidity crisis. All this labeling theory is interesting, but it seems to me... we have a financial crisis, an enormous one, and not one that's easily solved, whatever we wind up doing. I'd be more persuaded about this "solution" that's been offered if it didn't come accompanied by the same rhetoric we've been getting, week after week, from politicians. At the European Union announcement, we were told, yet again, that this is the solution to all solutions. That the worst is over. That we have finally found the magic key. We were told this when Fannie Mae and Freddie Mac were bought up. We were told it when AIG got the first $87 billion. We were told it when Paulson proposed the $700 billion bailout, when Ireland extended deposit protection to every bank customer, when the Dutch took over Fortis, when the British bailed out bank after bank after bank. Now we are told that thanks to Gordon Brown, there's a clear answer - fnd the banks and guarantee their loans. Gordon Brown. In case you haven't been following British politics, Gordon Brown helped create this mess, much as Greenspan did here back in the nineties, when Brown was Chancellor of the Exchequer under Tony Blair. Now he's Prime Minister (and a disastrous one for the Labor Party... but never mind)... and he's got our bank solution. Sorry,... I'm still skeptical. I'm not some prize winning economist, so really, what do I know? All I can say is, I think all of these plans have suffered most from being concocted on the fly, as hasty reations to constantly shifting realities, and not fully thought through. We were told that if we bought bad debt off of the banks, they could become solvent and get back to work. Now we're told that if governments buy into the banks, let the banks fancifully re-price the value of the bad debt on their books, and that governments guarantee banks lending to each other... then all will be well. Three things come to mind: We're in this mess because banks weren't honest about the falling value of mortgage debt, most fundamentally. Loosening "mark to market" rules at this moment seems especially foolish When the British Government invests in Royal Bank of Scotland, it will become the largest issuer of credit cards, the largest issuer of mortgages, etc. across England. I'm not saying this is good or bad, but it seems to me there's major implications here that no one has stopped to contemplate. No one, actually, can say with any certainty that banks will lend to each other, even with guarantees, while they can't be sure of ever being paid back. That's not over cautious, either; it mostly seems prudent. In all of this, I'm kind of heartened by the cautiousness of Hank Paulson, such as it is; yes, he was a terrible salesman for the bailout, and yes, he has his own issues as an honest broker. But those who would oppose and criticize him often have little better to offer, and it seems telling to me that while Europeans fall over each other to bail out their own countries banks (few, it seems want to mention the fact that the Euro countries nixed plans for an international fund to support one another), none want to get into, as the Americans have, buying the commercial paper that businesses use to solve short term funding problems, paper that, with all its issues, still has more substance behind it then, well, mortgage-backed bonds. And the bigger problem in all of this, I think, is not seeing the longer picture: the "worst is behind us" logic tends to neglect the fact that, next year, things get a lot, lot worse; next year is when retailers won't sell things, when retail and small town establishments will fail in larger numbers, when greater job losses and further economic contraction push people with perfectly good mortgages closer to foreclosure simply because they can't pay their bills. If we bail out banks, if they could restart lending, it is reasoned, then all is okay. It's not. Being a contrarian horse, of course, I could be entirely wrong. It could be that I'm just not wise enough to see all this bailing out for the success it actually is. I was never so much a student of economics as I am a guy, like my dad, who just finds the numbers interesting, and who finds that a lot of people - especially writers, and even more pointedly, most political writers - don't. I still think it's entirely possible that countries will spend... $300 billion, $500 billion, $700 billion... and at the end have little to show for it, except failed banks, struggling markets, and no more money to throw at the problem. As we (finally) look back at The Great Depression to find some sort of guidance, the general consensus has glommed onto the latest fashomnable theory - that if nations had worked together, instead of alone, the Depression could have been avoided. Well, yeah, it's better than blaming Roosevelt... but It is, at best, an educated guess. We don't, really, know how to avoid a Depression, and we shouldn't pretend that we do. And if the alternative is pretending to know what's best... Nay, I say. Nay.
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  10-13-2008 (Mon) Fin. & Econ. Activity

  http://www.commentsforthe.net/?p=682
  50 days ago in Comments for the Net · Authority: 2

  Morning Wall Street snapped back today from last week’s devastating losses after major governments announced further steps to support the global banking system, including plans by the U.S. Treasury to buy stocks of some banks. All the major indexes rose well over 5 percent, and the Dow Jones industrials gained nearly 480 points. The hope on the Street was that the market was finding some footing after eight sessions of devastating losses that sent the Dow down nearly 2,400 points. But while a rebound had been expected at some point, Wall Street can expect to see volatile, back-and-forth trading in the coming days and weeks as investors work through their concerns about the banking sector, the stagnant credit markets and the overall economy - Houston Chronicle (AP), Tim Paradis The London interbank offered rate, or Libor, for three-month dollar loans dropped 7 basis points to 4.75 percent today, tied for the largest drop since March 17, the British Bankers’ Association said. The one-month dollar rate declined to 4.56 percent, while the one-week euro rate fell to 4.34 percent, the BBA said. There was no overnight dollar price today because of the Columbus Day holiday in the U.S - Bloomberg France, Germany, and Spain committed 960 billion euros ($1.3 trillion) to guarantee interbank loans and take stakes in banks equal to 3 percent of their economies, racing to prevent the collapse of the financial system - Bloomberg Treasury Secretary Henry Paulson, European Central Bank President Jean-Claude Trichet and their colleagues are betting that logic, rather than the fear that sent stock markets tumbling last week, will govern investors’ reactions. The risk is that the lack of a single, global plan to buttress banks prolongs the money-market freeze that’s choking households’ and companies’ access to credit - Bloomberg After a four-year spending spree, Icelanders are flooding the supermarkets one last time, stocking up on food as the collapse of the banking system threatens to cut the island off from imports - Bloomberg The financial fallout outside the United States from Lehman Brothers Holdings’ bankruptcy has been about $300 billion, the head of Germany’s financial regulator said on Monday - Thomson Reuters Shares of General Motors Corp jumped almost 18 percent on Monday after reports the No. 1 U.S. automaker had been in merger talks in recent weeks with smaller rivals Ford Motor Co and Chrysler LLC. Analysts were skeptical that GM could achieve substantial savings from a merger. But a deal with Chrysler might allow the top U.S. automaker to boost its cash holdings, reassure consumers that it was not going out of business and give it bargaining power to seek new concessions from the United Auto Workers union, they said - Thomson Reuters U.S. Missteps Are Evident, but Europe Is Implicated. “The same mechanisms that led to the crisis in the United States were operating here,” said Arnoud Boot, a professor of finance and banking at the University of Amsterdam. “It’s totally misplaced for European leaders to put the blame on the Americans.” - NYT, Nelson D. Schwartz At the end of a weekend when nearly all of the world’s major bankers and finance ministers gathered in Washington to stanch the global credit crisis, there was no assurance that credit would flow when markets reopen this week - NYT, Floyd Norris Veteran advisers think it will pass … eventually. Never seen anything like it? Neither have five octogenarian advisers — but they say it too will pass. Mostly. Eventually…..in a Friday hotline, Allmon revised his target downward: “We are far ahead of schedule … This major bear market could see a firm bottom with Dow 4,000 to 5,400, and a yield of 6% to 8%. This would also call for an S&P 500 yield of 5% to 7%, and a range of 360 to 480. Those lows might come in 2009 or 2010. A worst case might be a bottom around 2012 after four disastrous years of an Obama administration. Investors are scared to death of a strong move to socialism.” - MarketWatch, Peter Brimelow How the Economist views Wall Street’s meltdown — Commentary: The magazine appears to be ‘leaning’ toward endorsing Obama - MarketWatch, Jon Friedman Indie oil hunter strikes a ’screamer’. In Oklahoma, a smalltime oil entrepreneur makes the play of his life - CNN Money, Mark Svenvold Afternoon U.S. stocks staged the biggest rally in seven decades on a government plan to buy stakes in banks and a Federal Reserve-led push to flood the global financial system with dollars. The Standard & Poor’s 500 Index rebounded from its worst week in 75 years with an 11.6 percent advance, its steepest since 1939, and the Dow Jones Industrial Average climbed more than 936 points - Bloomberg The Federal Reserve led an unprecedented push by central banks to flood the financial system with as many dollars as banks want, backing up government efforts to revive confidence and helping to reduce money-market rates. The European Central Bank, the Bank of England and the Swiss National Bank will offer European banks unlimited dollar funds with maturities of seven, 28 and 84 days at fixed interest rates against “appropriate collateral,” the Washington-based Fed said today. “Taken together, the latest moves increase the chances that we will begin to see some relaxation of the intense funding stresses,” Dominic Wilson and other economists at Goldman Sachs Group Inc. wrote in a note today. “This is because bank solvency risk should decline as the government offers protection.” - Bloomberg The U.S. Treasury and Federal Reserve were working on Monday to finalize details on a plan to recapitalize banks and stabilize financial markets in the wake of new measures announced in Europe. The plan, which is expected to provide more clarity on how the Treasury will acquire equity stakes in U.S. financial institutions, could be announced as early as Tuesday. The plan also could include some form of guarantee for interbank lending or increased deposit guarantees as some European countries have done - Thomson Reuters Iceland has officially requested financing from the International Monetary Fund, an IMF official said on Monday, part of efforts to combat a crisis that has overwhelmed its once-flourishing financial sector - Bloomberg Germany, France and Britain announced massive financial rescues on Monday as governments across Europe stepped in to shield banks and restore confidence in the face of the worst financial crisis in nearly 80 years - Thomson Reuters Is It the Bottom or Bear Market Rally? - CNBC [with video] Microsoft Corp. co-founder Bill Gates said the U.S. economy is headed for a “fairly significant recession,” and that the unemployment rate may peak at more than 9 percent - Bloomberg Investors have pulled record amounts of money from stock mutual-funds in the wake of the global market downturn, and that loss of assets will directly impact fund companies’ earnings - MarketWatch Treasury Secretary Henry Paulson are meeting with top Wall Street bankers in a scramble to finalize a plan for the government to buy bank shares to turn back a deep financial crisis. The evolving plan marks a quick about-face for the United States, which until recent days had been focusing on building an apparatus to soak up bad assets from banks - CNBC (Reuters) Institutional investors returning to money-market funds. Government backstop fuels sizable increase in institutional money-market assets - Financial Week Bankers group asks SEC to overide FASB on fair value rules. American Bankers Association sends letter advocating reliance on internal estimates rather than market pricing - Financial Week (Reuters) Evening >>>The Bush administration will announce a plan to rescue frozen credit markets that includes spending about half of a total of $250 billion for stakes in nine major banks, according to people briefed on the matter. 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 - Bloomberg >>>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 - CNBC Know your CD: Given turmoil at banks, make sure you read fine print on certificates of deposit. Given the financial meltdown, certificates of deposit are king - MarketWatch Cramer: This Market Can’t Be Trusted - CNBC What kind of a bottom was Friday? - MarketWatch, Mark Hulbert >>>Stocks are safe again — for now. Coordinated government action to restore faith in banks sparked a huge equity rally that should help undo the damage of the past few weeks. Stocks should see double-digit percentage gains in the short term. Longer term, the economic outlook remains bleak - MSN Money, Jon Markman There used to be a reliable pecking order of professions that were held in public disregard. Bankers attracted little sympathy but retained a certain mystique. Politicians and journalists were still less respected. Estate agents came beneath the lot. The past few weeks have overturned the rankings. No group attracts greater derision and outrage than profligate banking executives - Times Online I told you so: bankers are brainless - Times Online
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  Did Bank Execs Make Up The Credit Crisis? Some Common Sense Reasons Why This Is A Scam.

  http://www.dakotademocrat.com/?p=202
  50 days ago in Dakota Democrat · Authority: 13

  I now absolutely believe that our credit crisis is a made up problem that could be made good with a few Goodfella style sit-downs. I had previously posted that I thought that that this is all a scam and now it is reinforced. Here, here, here and here all indicate that the underlying problem with the credit crisis is that banks will not lend to other banks. What? So the problem is not is not with mortgages and really does not have ANYTHING to do with the everyday going ons of normal people. If this credit crisis is due to inter-bank lending problems, doesn’t that mean that it really is just a problem with really rich people lending money to each other? I mean c’mon…. I am no financial wizard, but this seems crazy. Please consider the following: 1. Are the banks not lending to each other to protect the shareholders? Obviously they are not looking out for the shareholders. Otherwise wouldn’t the shareholders still have the value in their stock? 2. Are the banks not lending to each other to protect the general public? Wow… we are on the verge of a depression and they continue to withhold the vital credit flow. Does not sound like Nobel Peace Prize material to me. 3. Are the banks not lending to each other to protect their average employees? Possibly, but UBS layoffs and potential layoffs with the various mergers tend to tell me otherwise. I can’t throw this off the table, but if they are not taking care of the stockholders, I doubt they will be taking care of the employees. The only logical deduction I can come to is that they are doing this for themselves. They are hording money with no concern for the general market, the shareholder, their employees… only themselves. Since the shareholders are not getting that cash, I can only assume that this is to protect the top dogs and the people who already have money. Am I crazy, or would the entire crisis be resolved if they all just started lending to each other? Possibly I am over reacting, but with every new excuse that floats around the media, something does not bode well with me. First, they are telling about bad mortgages, but its not really defaulted loans… but only fear of current loans that might default. Then, they start talking about mortgage backed securities that no one will buy, but I am still trying to figure out if the owners of the securities can walk into the house once they evict the defaulted folks? Who owns these freaking houses? Now, the problem is inter-bank lending? C’mon….. what a bunch of shenanigans. Why aren’t they using The Patriot Act on these people. This is a matter of national security, right? Sit this relatively small group of bank czars down with a smile, a crowbar, and a whollop of “shut the fuck up.” Explain to them what needs to be done and be like Nike, Just Do It.

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