NEWS DISSECTOR October 17, 2008
MARKETS GO UP, MARKETS GO DOWN BUT SYSTEMIC CRISES STAY PUT
HEADLINE IN THE GUARDIAN: Financial crisis triggers brisk sales of Karl Marx`s `Das Kapital' in Germany
MARKET RALLIES DID NOT END CRISIS
PAULSON GIVES BUT BANKS CONTROL DECISIONS
WHO IS "JOE THE PLUMBER?"
BILL AYRES SPEAKS
PROSECUTING THE MEDIA FOR WAR CRIMES
PARIS, 7:50 PM Thursday: By following the ups and downs of the stock market's response to this crisis in the course of writing PLUNDER, I reported on how market plunges were followed by market rallies-so called volatility-but in the end it all trended down. Earlier this week, when Wall Street went up there was media euphoria. Just two days later, the confidence is spent and the crisis remains and is getting worse. Yesterday's market nudged up at the end. Remember, markets can stabilize and the crisis of the real economy can get worse.
Citi and Merrill report another major multi-billion dollar write down, say economy is going DOWN.
AP: WASHINGTON - Rising fears that the global economy will sink into a deep recession spread to markets around the world on signs the U.S. economy is slipping further.
A fresh batch of economic reports due out Thursday is likely to show more problems for the nation's economy, which is already suffering from falling wages, rising inflation, weak consumer spending, job losses, tight credit and a lingering malaise in real estate.
ONE MORE BLOW
AP - Consumer prices were flat in September as retreating costs for gasoline, clothes and new cars helped to offset rising prices for food, medical care and other things.
WASHINGTON POST:
Bernanke Forecasts Prolonged Economic Turmoil; Dow Plunges 7.9%
TOO LITTLE TOO LATE?
Financial Times: Growing evidence that the worldwide bank rescue plans have come too late to avert a deep global recession drove down stock markets in Europe and the US on Wednesday and prompted renewed selling in Asia on Thursday
SWISS BANKS IN TROUBLE
FT: Switzerland on Thursday joined the list of countries taking unprecedented measures to strengthen their banks with the government taking an indirect SFr6bn (US$5.3bn) stake in UBS and Credit Suisse raising SFr10bn from private investors and the Qatar Investment Authority
ASIA UNDER STRAIN
RGE MONITOR: Asia Sets Up a 'Crisis Fund' Amid Contagion from the Global Credit Crisis
10 ASEAN nations setting up a crisis fund to tap from if they face severe liquidity crunch due to global financial crisis; Fund can also be used to purchase bad assets, recapitalize troubled financial institutions and private companies; ASEAN+3, ADB, IMF will contribute to the fund while World Bank has contributed $10bn
WHAT NOURIEL ROUBINI, THE ECONOMIST WHO GOT ALL OF THIS RIGHT IS SAYING:
The old saying that when the U.S. sneezes the rest of the world catches a cold seems to still hold. Most of the other G7 economies have already experienced a quarter of negative growth and are navigating toward recession. A G7 recession coupled with a marked slowdown of large emerging economies can realistically translate into a global recession.
According to our Nouriel Roubini two essential components are still missing among the measures adopted so far. The fist one would be a large fiscal stimulus plan in the form of old fashioned traditional Keynesian spending to boost aggregate demand. "If such a fiscal stimulus plan is not rapidly implemented any improvement in the financial conditions of financial institutions that the rescue plans will provide will be undermined - in a matter of six months - with an even sharper drop of aggregate demand that will make an already severe recession even more severe." The second one is a plan to reduce the debt overhang of distressed households via the institution of a new Home Owners' Loan Corporation (HOLC) or better a Home Owners' Mortgage Enterprise (HOME).
SOROS ON MOYERS: HOUSING MARKET IS BROKEN
TELEGRAPH: Effort to halt financial crisis costs governments two trillion pounds
NOW THE TRUTH ABOUT THE BAILOUT IS COMING OUT: The government has NO control over how the banks spent $125 BLLION
Now It's Official: Treasury Can't Influence How Banks Use Cash Infusion
Per Bloomberg, Treasury operatives have admitted, despite Henry Paulson's protestations to the contrary, that the government can only hope for the best in how the nine banks given a collective $125 billion cash infusion early in the week make use of the loot:
Treasury Secretary Henry Paulson persuaded nine major U.S. banks to accept $125 billion in government investment. Getting them to lend it out may prove a tougher sell.
The equity stakes the government is purchasing in Citigroup Inc., Morgan Stanley and seven other big institutions come with no guarantee that the investments will spur lending and unfreeze credit markets. Nor do they give the government board seats or any other leverage to demand that that the firms actually use the money to help the economy.
"The truth of the matter is, they can't put a gun to their head and say you have to lend this money,'' said Charles Horn, a former official at the Office of the Comptroller of the Currency, part of the Treasury Department, and now a partner at the Mayer Brown law firm in Washington.
Treasury officials acknowledge they can't force banks to get the taxpayer money into the hands of their customers. Instead, officials are betting that the government's investment will create conditions where banks have a greater incentive to earn profits from lending than to hoard money to shore up their balance sheets.
"It's in their economic interest,'' said David Nason, the Treasury's assistant secretary for financial institutions, in an interview with Bloomberg Television. "When you give them a stronger capital position and you also provide a certain amount of government backstop to their funding sources, it's incumbent upon them to go out and continue to lend.''
In the old days, when bankers and corporate executives had some respect for authority, moral suasion, aka "jawboning" could prove effective. Those days now seem to be a distant memory.
And then there's this-What was sold as plan to buy up bay mortgages from banks turned into an infusion of money into banks and now there is a good chance that auto loan companies can get their hands on it too:
This is an exchange on Naked Capitalism: "A Chicken Bailout in Every Pot (Car Loan Edition)
Since the TARP has a very big checkbook and a very broad mandate (it can buy any kind of dud loan it chooses to, plus bona fide assets), it has become a magnet for industries that have belatedly recognized that it could provide a handout. The latest is the poster child for rust-belt hardship, the auto industry, which is looking for a place to dump less than stellar car loans.
As reader Steve, who sent us this item, wrote:
The pigs are racing to the trough - this time, there's not even a pretense that the loans are good or that market liquidity is hurting pricing.
From Reuters, "Finance companies want US to buy bad auto loans":
Finance companies are preparing to seek authority from the U.S. Treasury Department to sell bad auto loans to the government as part of Washington's sweeping plan to restimulate credit markets and boost the flagging economy.
"The onus is now on us to make the case for our companies to be able to sell non-mortgage related assets to the government," Bill Himpler, executive vice president of the American Financial Services Association, said late on Tuesday.
The group represents a range of finance companies, including major auto affiliates like Ford Motor Credit Co, the financial services arm of Ford Motor Co, and GMAC LLC, controlled by Chrysler owner Cerberus Capital Management…
The $700 billion rescue plan approved by Congress last month and now in the process of being implemented by the Bush administration enables the Treasury to buy up bad auto loans, if it deems that doing so is critical to the health of the U.S. economy.
"We're in the process of putting together our case … that auto paper is key to financial market stability," Himpler said.
Yves here. If you believe that, I have a bridge I'd like to sell you….
AP: U.S. Could Guarantee $2 Trillion For Banks
That's the equivalent of about 20 percent of the national debt, which recently blew past $10 trillion, and roughly 14 percent of U.S. gross domestic product - the economy's total output of goods and services.
The 56 Trillion Dollar Deficit
Bill Maher Interviews Fmr. Comptroller General David Walker
6 Minute Video
Comptroller General David Walker, explains that we have a debt of $480,000 per US household?
I reported on Walker's warnings in my 2007 film IN DEBT WE TRUST (Indebtwetrust.com)
Mike Davis on the economic challenges an Obama (or McCain) Administration will face.
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