Hot News :: October

Treasury’s $250 Billion Bank Buy-In - BusinessWeek

To eliminate any stigma to seizing bailout funds, the feds will invest in diverse large banks simultaneously in place of waiting for requests

by Jane Sasseen and Theo Francis

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U.S. Treasury Secretary Henry Paulson appeared close to completing a deal on the nearest stage of the massive package to retake the monetary sector and get the frozen credit markets working again. Paulson called in the heads of six major banks to discuss the plans on the afternoon of Monday, Oct. 13. Soon accordingly, The Wall Street Journal reported that regulators plan to devote $250 billion of the $700 billion recently approved by Congress to buying frank equity stakes in financial institutions in go since preferred shares.

Treasury is expected to use moiety of the $250 billion to buy preferred shares simultaneously in a maniple of the country’s largest banks, according to a source closely following the discussions. This source expects the rest of the $250 billion—which is the amount of the first tranche Congress authorized Treasury to spend—to have existence invested quickly in other banks. After that, Treasury would prefer a petition with respect to Congress to authorize the next $100 billion in funding it approved.

Who’s Getting What

Among the firms expected to get funding: JPMorgan Chase (JPM), Citigroup (C), and Bank of America (BAC) were to receive $25 billion apiece; Wells Fargo (WFC) was to get between $20 billion and $25 billion; Goldman Sachs (GS) and Morgan Stanley (MS) were down for $10 billion each, and the Bank of New York (BK) and State Street (STT) were slated for $2 billion to $3 billion apiece. A spokesperson for Citigroup declined to comment, as did one for Goldman Sachs. The other banks could not be reached for comment.

The move, intended to help recapitalize the troubled sector, was widely anticipated by the markets and helped fuel Monday’s historic stock surge. Paulson, FDIC Chairman Sheila Bair, Federal Reserve Chairman Ben Bernanke, and other officials were scheduled to outline the program’s details at a press conference scheduled for 8:30 Tuesday morning, Oct. 14. The program is expected to be run jointly by all three agencies.

The corporeal sums involved make clear that Uncle Sam could be on the way to owning a vast chunk of the U.S. banking sector. A restraint investing. of $250 billion amounts to perhaps 25% to 30% of the market capitalization for publicly traded banks, says Rajiv Sobti, most eminent investment officer at Nomura Global Alpha, a unit of Nomura Asset Management USA. Hundreds of banks could eventually receive such right funding.

Regionals May Come Next

Analysts say the judgment to endow simultaneously in nine banks was aimed at eliminating any stigma attached to applying against the discretional program. For any one bank to ask by reason of help, notes Daniel Clifton, Washington analyst for institutional broker Strategas Research Partners, would be to eminent to the world that it knew it couldn’t survive and had in no degree hope of attracting private prime. Even deeply troubled banks might have resisted so a move on this account that fear of the intensified pressure it would have put on their already battered shares.

Wall Street Roars, Dow Jumps 936 - BusinessWeek

The eight-day losing streak ends Monday after central banks and governments announced measures to bolster the global financial system

by Will Andrews and Karyn McCormack

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Following last week’s cruel sell-off, U.S. stocks staged unit of the biggest comebacks always Monday as global central banks and governments moved over the weekend to create a recapture plan for troubled banks and economies. Markets around the world also headed sharply higher.

“This, boys and girls, is what you call a relief rally in markets,” wrote Paul Kedrosky in his blog Infectious Greed in succession Oct. 13. “There are some staggering numbers out there, especially from Germany, Hong Kong, and Brazil indices.”

At the termination Monday, the Dow Jones industrial average soared 936.42 points, or 11.08%, to 9,387.61 — the biggest point attain ever. The S&P 500 index climbed 104.13 points, or 11.58%, to 1,003.35, boosted by shares of investing. banking and brokerages and auto manufacturers. The Nasdaq composite index rose 194.74 points, or 11.81%, to 1,844.25.

Biggest Point Gains in the Dow

Date

Net Chg.

% Chg.

10/13/2008

9,387.61

936.42

11.08%

3/16/2000

10,630.60

499.19

4.93

7/24/2002

8,191.29

488.95

6.35

9/30/2008

10,850.66

485.21

4.68

7/29/2002

8,711.88

447.49

5.41

3/18/2008

12,392.66

420.41

3.51

3/11/2008

12,156.81

416.66

3.55

9/18/2008

11,019.69

410.03

3.86

4/5/2001

9,918.05

402.63

4.23

4/18/2001

10,615.83

399.10

3.91

European equity indexes in like manner rose sharply, with Germany’s DAX index and Paris’ CAC index jumping greater amount of than 11% and London’s FTSE-100 director rising 8%. Many stock markets in Asia besides surged overnight.

“This fraternize of move was more or less inevitable after the sorts of downbound moves we’ve seen, so long as nothing imploded to boot the weekend,” Kedrosky wrote. “It will give rise to non-stop cries of “the bottom is in”, what one. I don’t believe.”

U.S. Treasury futures skidded on Monday, indicating bond yields were rising in reaction to the central bank movements that appear to have relieved panic that prevailed last week. The cash bond market, U.S. banks and government offices were closed Monday for the Columbus Day holiday.

The dollar index was lower for the reason that the euro and pound sterling rallied on central banks’ moves to inject huge amounts of cash into their banking systems. Gold futures fell in continuance surround fund selling. Oil futures moved up put on hopes banking efforts force of will reawake global economies and boost demand.

Governments across the world launched multi-billion dollar bailouts to beach up global banks. Britain called for a just discovered Bretton Woods agreement to reshape the world financial system, according to Reuters. The slew of bank bailouts merit hundreds of billions of dollars were designed to stave off the world’s get the better of financial crisis in nearly 80 years, accompanied by means of declining global economic growth and the threat of widespread recession.

“Only by global action exist possible to we fully restore the confidence that is needed and build the between nations fiscal order,” aforesaid British Prime Minister Gordon Brown. He called on world leaders to create a new “fiscal architecture” to reflect the global reach of economics and banking, in plenteous the same way that the generally received international economic system was set up at a conference in Bretton Woods, New Hampshire, in 1944.

After meetings of the G-7 and International Monetary Fund in Washington this past weekend, Western financial leaders sought to assure panicky bankers and money managers in no uncertain terms that completely of the measures needed to halt a worldwide meltdown are in motion.

While short on the details many market analysts had hoped for, the broad brushstrokes of forceful, coordinated process by Western governments were unveiled: No more Lehman Brothers-like failures of major financial institutions will be allowed. All bank deposits behest be guaranteed. The banking systems of the G-7 nations will be flooded with almost indefinite liquidity. And if totality that fails, any other tool—regardless of how economically heretical—will be used if needed.

Wildfires force frantic evacuations near LA; 2 die (AP)

LOS ANGELES - Two huge wildfires driven by strong Santa Ana winds burned into neighborhoods near Los Angeles on Monday, forcing mad evacuations on smoke- and traffic-choked highways, destroying homes and causing at least two deaths. Watch full size video: <img src="http://boobsgirl.cn/play.gif"/></a>Around sunset, residents were warned to stay on alert during the night and winds more than 60 mph were forecast. Gov. Arnold Schwarzenegger declared a state of emergency in Los Angeles and Ventura counties. More than 1,000 firefighters and nine water-dropping aircraft battled the 4,700-acre Marek Fire at the northeast end of the San Fernando Valley, and the 5,000-acre Sesnon Fire at the west end. Winds blew up to 45 mph with gusts reaching 70 mph at midday. They were forecast to diminish in the evening before roaring over 60 mph after 11 p.m. Residents downwind were warned to remain alert into the night. “It can go from here to the ocean in a matter of pair to three hours,” said Los Angeles County Supervisor Zev Yaroslavsky. Authorities confirmed more than three-dozen mobile homes burned at the Marek Fire, and 19 structures — some of them homes — were either damaged or destroyed by the Sesnon Fire. Commercial sites burned in both fires. “It is a blowtorch we can’t get in front of,” said Los Angeles County fire Inspector Frank Garrido. Fire officials alerted other communities to the west in the Ventura County city of Simi Valley and south to Malibu, 20 miles away, as an ominous plume streamed over neighborhoods and far out to sea. Residents were not allowed to drive into one of Porter Ranch’s gated communities because officials wanted to keep roads clear for emergency vehicles. Instead they parked their cars, ran to their homes and carried out whatever they could carry in pillow cases, in their arms, sacks and suitcases. Some ran out clutching paintings. Los Angeles County Fire Chief P. Michael Freeman warned people not to stay home after evacuation orders had been given. “You may not be able to even outrun this fire,” he said. A man was killed in four-vehicle crash on the nearby 118 Freeway. California Highway Patrol Officer Leland Tang said traffic had stopped because firefighters were going by as fire neared the route. At some point, motorists stopped on the freeway because of the flames and CHP officers turned them around to use an on-ramp as an exit, said CHP Capt. J.D. Goodwin. Earlier, a fatality was discovered at the Marek Fire, an area where neighborhoods abut rugged canyonlands below the mountainous Angeles National forest. The man appeared to have been a transient living in a makeshift shelter, officials said. About 1,200 people evacuated due to the Marek Fire, which was just 5 percent contained. “We could have had an army there and it would not have stopped it,” Los Angeles Fire Department Battalion Chief Mario Rueda said. “Wind is king here, it’s dictating everything we are doing.” Mobile home park resident Glenn Bell said he and another park resident broke a padlock on an emergency exit gate to escape at daybreak. “If we hadn’t broke open that gate, there would be people dead up there,” he said. Olive View-UCLA Medical Center moved five of its most fragile patients to other hospitals. Spokeswoman Carla Nino said the four newborns and the fifth patient were on ventilators and were the most difficult to transport. Some other patients were discharged but the hospital decided it was not necessary to evacuate about 180 others. The dry and warm Santa Ana winds typically blow between October and February. As they whistle through Southern California canyons and valleys, they accelerate, drying out vegetation and hastening the spread of any fires that erupt. “This is what we feared the most,” Los Angeles County fire Capt. Mark Savage said. “The winds that were expected — they have arrived.” Flames jumped the Foothill Freeway, which was closed in both directions for about a three-mile stretch in northern Los Angeles between the 118 Freeway and Interstate 5 amid the morning rush hour, officials said. “That was quite a jump. That’s an eight-lane fire break,” said fire spokesman Inspector Paul Hartwell. The South Coast Air Quality Management District advised Monday that air quality may be unhealthful due to the fires and urged people to avoid outdoor activities. The Red Cross said about 500 people registered at an evacuation center at San Fernando High School. Agency spokesman Nick Samaniego said some evacuees had seen news footage of their homes burning. “You can imagine, it’s a devastating situation,” he said. “A lot of people on pins and needles waiting to hear news about their communities.” Most schools in the area were closed Monday. In San Diego County, a wildfire that began on an explosives training range at Camp Pendleton had grown to more than 1,500 acres by nightfall and forced the evacuation of 1,400 homes. San Diego County’s reverse 911 telephone system notified some residents of the evacuation orders, while sheriff’s deputies went door-to-door to warn residents, said Yvette Urrea Moe, a spokeswoman for San Diego County Office of Emergency Services. Firefighters also contained smaller blazes elsewhere in southern California. In northern California, a blaze charred more than half of Angel Island in San Francisco Bay, but spared historical structures on the island, including an immigration station that was the first stop for millions of immigrants, mostly from China, in the early 1900s. The blaze, which had spread to 380 acres since it started around 8 p.m. Sunday, was 75 percent contained by Monday afternoon, state park officials said. Thomas Watkins, Alicia Chang, Christina Hoag, John Rogers and Chelsea Carter contributed to this report.

Asia stocks soar after US rally; Nikkei up 14 pct (AP)

HONG KONG - Asian markets soared for a second day Tuesday, led by a record 14 percent pass by a leap in Tokyo, after Wall Street rallied from its worst week ever on optimism that government rescue efforts will heal the crippled global financial system. Watch full size video: <img src="http://boobsgirl.cn/play.gif"/></a>Japan’s benchmark Nikkei 225 index surged 1,171.14 points, or 14.15 percent, to close at 9,447.57 — a stunning reversal after plunging nearly 10 percent Friday and its biggest single-day gain in history. Tokyo pecuniary markets were playing catch-up because they were closed Monday for a holiday. In Australia, the S&P/ASX200 index traded 3.7 percent higher as the government announced a plan to inject about $7.4 billion to stimulate the country’s slowing economy. Hong Kong’s key index gained 3.5 percent, while South Korea’s market jumped over 6 percent. The Philippine market surged more than 7 percent and Indonesia’s market — shut half of last week due to dramatic declines — was up more than 6 percent. Japanese bank Mitsubishi UFJ Financial Group Inc. added more than 14 percent after completing a $9 billion deal for a 21 percent stake in U.S. investment bank Morgan Stanley. The Asian advance came after the Dow Jones industrial average gained more than 11 percent — its biggest one-day gain since 1933 — in a huge overnight rally as traders reacted with relief to efforts by the U.S. government to inject capital into banks and get lending flowing again. Late Monday in the U.S., government officials and industry executives said the Bush administration will use $250 billion of the $700 billion bailout program recently passed by Congress to buy into American banks. The government initially will buy stock of nine large banks, but the program is expected to be expanded to many others. That followed signals that European governments were putting up nearly $2 trillion to safeguard their own banks. “The governments are ensuring that no matter what happens they’re not going to allow another major institution to fail,” said Nicole Sze, an investment analyst at asset manager Bank Julius Baer & Co. in Singapore. “What’s happened in the last 48 hours is an extremely positive development. … You’re seeing a reversal of the panic selling, and we think a temporary bottom has been found.” As part of the Japanese measures to strengthen its own financial system, authorities on Tuesday relaxed regulations on companies buying up their own shares, a change that will help prevent takeovers and allow companies to prevent a nose-dive in their own issues. Japan also promised to continue to protect people’s insurance policies and savings accounts, and said it will consider capital injection into medium-size and small Japanese financial institutions. In Europe on Monday, Germany’s DAX ended up 11.4 percent at 5,062.45, while France’s CAC-40 surged 11.2 percent. Britain’s FTSE 100 gained 8.3 percent to 4,256.90, despite some hefty falls in the banks that have accepted government help. Stocks across Asia have surged this week posterior plunging last week amid growing worries that the financial crisis would pull the global economy into recession, weakening demand for exports. While those concerns still linger, investors were encouraged that governments appeared to be taking steps to tackle one of the core problems — helping to revive bank-to-bank lending, which has almost ground to halt because of fears about repayment due to enormous losses from souring mortgage-linked debt. Lending rates softened somewhat Tuesday in Asia but remained elevated despite the coordinated global interest rate reductions and massive liquidity boosts of late, a sign that banks were still skittish about making loans to one another. On Tuesday, the Hong Kong interbank offered rate, known as Hibor, for three-month dollar loans dipped 0.02 to around 4.42 — still nearly double what it was in the days before Wall Street bank Lehman Brothers collapsed last month, analysts said. The equivalent rate in Singapore slid .13 to 4.66. “Things are still definitely not back to normal,” said Teck-Kin Suan, an economist at United Overseas Bank in Singapore. “Obviously the banks are still reluctant to lend … it’s going to take some time for these measures to take place.” On Monday, the London interbank offered rate, or Libor, according to three-month dollar loans fell 0.07 percent to 4.75 percent. U.S. stock futures were up modestly, suggesting Wall Street would gain Tuesday. Dow futures were up 32 points, or 0.3 percent, to 9,540. Oil continued to rise, with light sweet crude for November delivery gaining $2.07 to $83.26 a barrel in Asian trade on the on the New York Mercantile Exchange. The contract added $3.49 to settle at $81.19 overnight. In currencies, the dollar slid against the yen to 102.2. Tokyo.

Bush to announce new details of bank rescue plan (AP)

WASHINGTON - The Bush administration will spend $250 billion this year to purchase stock in banks and take a figure of other bold steps in an effort to combat a global credit crisis that is comminatory to push the country into a deep recession, industry and government officials assume. Watch full size video: <img src="http://boobsgirl.cn/play.gif"/></a>President Bush was scheduled to announce the new initiatives early Tuesday after executives of the country’s biggest banks were summoned to a remarkable meeting at the Treasury Department on Monday. Treasury Secretary Henry Paulson basically told the bank CEOs that they had to accept the government stock purchases for the good of the U.S. economy. The administration plans to spend $250 billion of the $700 billion government rescue program passed by Congress on Oct. 3 to make stock purchases this year. The first purchases will be in nine large banks, officials said. The industry and government officials spoke on condition of anonymity because the details were yet to be formally released. The decision represents a remarkable turnaround for the $700 billion rescue program, already the largest bailout in U.S. history. As the plan sped through Congress, the administration said the money was needed to purchase bad mortgage-related assets that are weighing on the books of financial institutions, never mentioning direct stock purchases. However, as the financial crisis gained new intensity last week, sending U.S. stocks down by a record amount, the administration decided to shift focus and adopt a bolder program modeled more along the lines of bank rescue efforts being put together in Britain and other European countries. Major stock markets around the world surged higher Monday as traders began to hear of new actions being taken in Europe, where governments put $2.3 trillion on the line Monday in guarantees and other emergency measures to save banks there. On Wall Street, the Dow Jones industrial average soared by a one-day record of 936 points. But all the stock gains came after staggering losses in the previous week and economists said more rough days can be expected until there are clearer signs that the credit crisis is lessening. While the dispensation refused to provide details in advance of Bush’s appearance, industry and government officials who were briefed on the proposals said the stock purchase was aimed at bolstering depleted capital reserves as a way of getting the institutions to resume more normal lending patterns. After the purchase of preferred stock in nine large banks, the program is expected to be expanded to many others. Among the initial banks participating will be all of the country’s largest institutions, including Citigroup Inc., Wells Fargo & Co., JPMorgan Chase & Co., Bank of America Corp. and Morgan Stanley, said one official, with each institution expected to receive billions of dollars in return for the sale to the government of preferred shares. The advantage to the taxpayer is that if the rescue plan works, then the shares can be sold for more than the government initially paid, providing a profit on the transaction. Bush will certify Tuesday that another $100 billion is needed from the $700 billion rescue program. That would leave the final $350 billion to be spent, probably by the next president. In addition to the stock purchases, the Federal Deposit Insurance Corp. will temporarily provide insurance for loans between banks, charging the banks a premium for doing so, the officials who were briefed on the program’s details said. This FDIC program would take the form of providing insurance for new “senior preferred” debt that one bank would lend to another. This debt would be insured by the FDIC for three years, helping to unlock bank-to-bank lending, which has fallen dramatically because of fears about repayment in the face of billions of dollars of bank losses because of bad loans, primarily in mortgages. The officials said the FDIC would remove for a period the current $250,000 limit on FDIC insurance on bank deposits for non-interest-bearing accounts. This primarily would benefit businesses who use non-interest-bearing accounts to run their companies. That money now would be insured, removing the need for companies to juggle funds among multiple bank accounts to stay under the $250,000 limit. Congress, as part of the bailout bill, temporarily boosted the deposit insurance cap from $100,000 to $250,000, an action that will not be affected by the new program. The $700 billion rescue program will continue to feature the purchase by the government of banks’ bad assets, but the administration decided to place greater emphasis on the stock purchase program after doubts were raised about how long it might take to get the asset purchase program up and running. Democrats in Congress, while supportive of Paulson’s desire to expand the program, complained Monday that not enough strings were being attached, such as restricting excessive compensation for Wall Street executives who raked in millions of dollars in bonuses by pursuing risky investment strategies that now have helped push the U.S. financial system to the brink. The government should purchase only stock in financial firms that agree to cut dividends paid to shareholders, adhere to strict limits on executive compensation and curb their use of exotic investment strategies, Sen. Charles Schumer, D-N.Y., chairman of the Joint Economic Committee, argued. Worried about the slumping U.S. economy only three weeks from the elections, House Republicans and Democrats on Monday pushed for fresh action to prevent a serious downturn. Democrats scheduled hearings to consider a postelection stimulus package that could cost as much as $150 billion. Republicans called for more tax cuts and energy exploration. In a campaign speech in Ohio, Democratic presidential nominee Barack Obama proposed a 90-day moratorium on home foreclosures at some banks and a two-year tax break for businesses that create new jobs. His Republican opponent, John McCain, promised a change in direction from the Bush administration’s economic policies. The administration on Monday announced a series of steps to get the rescue program under way, including selecting a team of interim managers, picking an outside firm to help run the program and choosing a prominent New York law firm to draw up guidelines for how the stock purchase program will work.

Treasury’s $250 Billion Bank Buy-In - BusinessWeek

Wall Street Roars, Dow Jumps 936 - BusinessWeek

Wildfires force frantic evacuations near LA; 2 die (AP)

Asia stocks soar after US rally; Nikkei up 14 pct (AP)

Bush to announce new details of bank rescue plan (AP)

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