The German government whipped its €480 billion bank bailout package through parliament in record time, but now the program has run into trouble. The banks are still fighting for survival, the money market isn't functioning properly, and taxpayers' money is being burned....To date, Soffin [Special Fund for Financial Market Stabilization] has approved government guarantees for €90 billion ($126 billion) in loans. After prolonged negotiations with the European Union, Soffin now plans to release the first equity assistance package, worth €8.2 billion ($11.5 billion), for the German bank Commerzbank.Soffin has already received requests for at least another €100 billion ($140 billion) in liquidity assistance. Even German carmaker Volkswagen is now lining up for money....HRE is still the most troublesome case. The mortgage bank is requesting new guarantees at a breathtaking pace. At first, the federal government and other financial institutions assembled a €50 billion ($70 billion) packet to provide the necessary liquidity and keep the Munich-based lender afloat.A short time later, Soffin was forced to approve an additional €20 billion ($28 billion) bailout. The next €10 billion ($14 billion) followed in early December. "What else is coming?" asks a concerned member of parliament, pointing out that a single institution cannot possibly absorb the bulk of the government rescue package.
The German government whipped its €480 billion bank bailout package through parliament in record time, but now the program has run into trouble. The banks are still fighting for survival, the money market isn't functioning properly, and taxpayers' money is being burned.
...To date, Soffin [Special Fund for Financial Market Stabilization] has approved government guarantees for €90 billion ($126 billion) in loans. After prolonged negotiations with the European Union, Soffin now plans to release the first equity assistance package, worth €8.2 billion ($11.5 billion), for the German bank Commerzbank.
Soffin has already received requests for at least another €100 billion ($140 billion) in liquidity assistance. Even German carmaker Volkswagen is now lining up for money.
...HRE is still the most troublesome case. The mortgage bank is requesting new guarantees at a breathtaking pace. At first, the federal government and other financial institutions assembled a €50 billion ($70 billion) packet to provide the necessary liquidity and keep the Munich-based lender afloat.
A short time later, Soffin was forced to approve an additional €20 billion ($28 billion) bailout. The next €10 billion ($14 billion) followed in early December. "What else is coming?" asks a concerned member of parliament, pointing out that a single institution cannot possibly absorb the bulk of the government rescue package.
Prosecutors in Germany are investigating accusations of insider trading at Hypo Real Estate, the Munich-based mortgage lender that has recieved billions of euros in government bailouts -- the most of any company so far -- as a result of risky investments in US subprime loans....Prosecutors believe that the company's former board withheld information from the public about the company's true state for more than a year. ... According to several criminal complaints, HRE managers or their relatives and friends are accused of having sold large numbers of HRE shares before the company first warned of its financial woes on January 15.
Prosecutors in Germany are investigating accusations of insider trading at Hypo Real Estate, the Munich-based mortgage lender that has recieved billions of euros in government bailouts -- the most of any company so far -- as a result of risky investments in US subprime loans.
...Prosecutors believe that the company's former board withheld information from the public about the company's true state for more than a year. ... According to several criminal complaints, HRE managers or their relatives and friends are accused of having sold large numbers of HRE shares before the company first warned of its financial woes on January 15.
The news, if confirmed, may irk Germany's neighbors in Europe. Newspapers are claiming the second economic stimulus package due to be unveiled next month will total just €25 billion rather than the originally planned €40 billion because Germany doesn't want to give other nations an excuse to breach deficit rules.
Steinmeier told the Welt am Sonntag newspaper that the German government also needed to prepare an aid package for German automakers suffering under the global economic downturn. The auto business is Germany's largest industry and biggest export, prompting Steinmeier to label it "the spinal cord of (Germany's) economy." "We must also stimulate the purchasing of automobiles with state incentives," such as tax breaks, said the foreign minister. One in seven German workers is directly or indirectly involved in the car industry, the German auto manufacturers' association VDA has said. New car registrations in Germany fell 18 percent in November against figures from the same month last year, VDA said last month.
Steinmeier told the Welt am Sonntag newspaper that the German government also needed to prepare an aid package for German automakers suffering under the global economic downturn.
The auto business is Germany's largest industry and biggest export, prompting Steinmeier to label it "the spinal cord of (Germany's) economy."
"We must also stimulate the purchasing of automobiles with state incentives," such as tax breaks, said the foreign minister.
One in seven German workers is directly or indirectly involved in the car industry, the German auto manufacturers' association VDA has said.
New car registrations in Germany fell 18 percent in November against figures from the same month last year, VDA said last month.
Sigh... *Lunatic*, n. One whose delusions are out of fashion.
...In Rochdale, Lancashire, as many as 26 per cent of properties for sale have languished on the market since the beginning of 2008. A string of other northern towns have been hit by problems as difficulties finding mortgages have prevented buyers completing deals and over-optimistic sellers have failed to react to tumbling house prices....By contrast, only 5 per cent of properties were on the market for a year in London and 6 per cent in Birmingham, although that figure rose to 13 per cent in Manchester, where there has been a boom in speculative development.Daniel Lee, chief executive of Globrix, said the figures reflected a "terrible year for the property market". He said: "The gridlock in the market has been a result of the banks' reluctance to lend and an unwillingness by sellers to lower their asking prices to more realistic levels."
...In Rochdale, Lancashire, as many as 26 per cent of properties for sale have languished on the market since the beginning of 2008. A string of other northern towns have been hit by problems as difficulties finding mortgages have prevented buyers completing deals and over-optimistic sellers have failed to react to tumbling house prices.
...By contrast, only 5 per cent of properties were on the market for a year in London and 6 per cent in Birmingham, although that figure rose to 13 per cent in Manchester, where there has been a boom in speculative development.
Daniel Lee, chief executive of Globrix, said the figures reflected a "terrible year for the property market". He said: "The gridlock in the market has been a result of the banks' reluctance to lend and an unwillingness by sellers to lower their asking prices to more realistic levels."
Appropriate?
Just a week after one cabinet minister warned The Independent of an impending unemployment "bloodbath", the Chartered Institute of Personnel and Development (CIPD) is predicting that as many as 600,000 staff face redundancy in 2009 alone, taking the unemployment total to 2.8 million.Next year's forecast - combined with the number of positions already lost and those expected to go in 2010 - adds up to a grim total, according to John Philpott, the CIPD's chief economist. "The period from mid-2008 until the end of 2009 will witness the loss of around three quarters of a million jobs," he said. "Assuming the economy bottoms out in the second half of 2009, job losses are likely to continue into 2010, in all probability taking the final toll of lost jobs to around 1 million."
Just a week after one cabinet minister warned The Independent of an impending unemployment "bloodbath", the Chartered Institute of Personnel and Development (CIPD) is predicting that as many as 600,000 staff face redundancy in 2009 alone, taking the unemployment total to 2.8 million.
Next year's forecast - combined with the number of positions already lost and those expected to go in 2010 - adds up to a grim total, according to John Philpott, the CIPD's chief economist. "The period from mid-2008 until the end of 2009 will witness the loss of around three quarters of a million jobs," he said. "Assuming the economy bottoms out in the second half of 2009, job losses are likely to continue into 2010, in all probability taking the final toll of lost jobs to around 1 million."
Childrenswear retailer Adams today confirmed it was poised to go into administration after a creditor began proceedings against it.The 75-year-old company - which makes clothes for Boots and has its own-brand Adams children's stores - said a secured creditor had entered an application to appoint administrators.... In a statement Adams said: "The downturn in the high street retail market and the general tightening of the financial markets has adversely affected the financial position of the group." Adams' woes come hard on the heels of the collapse of tea and coffee merchant, Whittard of Chelsea, music chain Zavvi and menswear retailer The Officers Club, which all fell into administration in the days before Christmas. Both The Officers Club and Whittard were subsequently sold.
Childrenswear retailer Adams today confirmed it was poised to go into administration after a creditor began proceedings against it.
The 75-year-old company - which makes clothes for Boots and has its own-brand Adams children's stores - said a secured creditor had entered an application to appoint administrators.
... In a statement Adams said: "The downturn in the high street retail market and the general tightening of the financial markets has adversely affected the financial position of the group."
Adams' woes come hard on the heels of the collapse of tea and coffee merchant, Whittard of Chelsea, music chain Zavvi and menswear retailer The Officers Club, which all fell into administration in the days before Christmas. Both The Officers Club and Whittard were subsequently sold.
Capitalism in Crisis: The Broken Pact with the People - SPIEGEL ONLINE - News - International
By Dirk Kurbjuweit Trust capitalism and shun government interference we were told. But irresponsible bankers saw a chance to get rich quick and went for it. Their failure has become ours -- and the promise of a common good has evaporated along with faith in democratic capitalism....Who would have thought that Ackermann would one day join the ranks of Germany's unemployed and low wage earners in asking for government aid? The poor had long hoped that the state would help them out of their economic plight. People like Ackermann though -- those who place a great deal of faith in the power in the power and freedom of the individual -- blasted them. Now, taxpayers are expected to help Ackermann's industry out of a jam. The insanity of the situation becomes clear when we look back to the years 2003 to 2005. At the time, then-German Chancellor Gerhard Schröder of the center-left Social Democrats pushed through his Agenda 2010 reform package. Long-term unemployment payments were scrapped. Those who lost their job knew that time was short before benefits would shrink to those mandated by the new welfare plan known as Hartz IV. During those years, the economic debate was dominated by true-blue capitalists who sought to limit government intervention. This was the heyday of a neo-liberal ideology that placed its faith in the strengths of the individual and the free market. The word "government" became virtually synonymous with harassment, suffocation, inefficiency and a lack of freedom. Deregulation was the magic formula of the day. Trust Us This was the theme music -- played by politicians, business people and journalists -- that accompanied Agenda 2010, an orgy of black-and-white thinking that glorified the individual and demonized the state. But Agenda 2010 was the right approach. The reforms didn't go too far; actually, they should have gone even further. They should have harnessed the political momentum at the time to prepare Germany's healthcare and convalescent care systems for the challenges of the future.
...Who would have thought that Ackermann would one day join the ranks of Germany's unemployed and low wage earners in asking for government aid? The poor had long hoped that the state would help them out of their economic plight. People like Ackermann though -- those who place a great deal of faith in the power in the power and freedom of the individual -- blasted them. Now, taxpayers are expected to help Ackermann's industry out of a jam.
The insanity of the situation becomes clear when we look back to the years 2003 to 2005. At the time, then-German Chancellor Gerhard Schröder of the center-left Social Democrats pushed through his Agenda 2010 reform package. Long-term unemployment payments were scrapped. Those who lost their job knew that time was short before benefits would shrink to those mandated by the new welfare plan known as Hartz IV.
During those years, the economic debate was dominated by true-blue capitalists who sought to limit government intervention. This was the heyday of a neo-liberal ideology that placed its faith in the strengths of the individual and the free market. The word "government" became virtually synonymous with harassment, suffocation, inefficiency and a lack of freedom. Deregulation was the magic formula of the day.
Trust Us
This was the theme music -- played by politicians, business people and journalists -- that accompanied Agenda 2010, an orgy of black-and-white thinking that glorified the individual and demonized the state.
But Agenda 2010 was the right approach. The reforms didn't go too far; actually, they should have gone even further. They should have harnessed the political momentum at the time to prepare Germany's healthcare and convalescent care systems for the challenges of the future.
He goes on to claim that the problem is people not capitalism; and people adopting US-style capitalism that gambles instead of conservative German business practices.
It was hard enough pushing through Agenda 2010. But the current crisis is making Germany virtually unreformable. Now nobody will follow politicians who say that you have to do good things for the economy so that everyone benefits. People will laugh out loud should anyone say that freedom leads to the best results. It is no coincidence that gamblers have created this chaos, people who fabricate unreal worlds where they can seek their happiness.
It is no coincidence that gamblers have created this chaos, people who fabricate unreal worlds where they can seek their happiness.
The Black Autumn: In Search of the Visible Hand - SPIEGEL ONLINE - News - International
By SPIEGEL Staff There is an air of desparation in European capitals and in the United States as politicians try to stop the global financial meltdown. The crisis has grown into a major test for the government of Angela Merkel. On Monday, Berlin signed off on a major bailout package.
There is an air of desparation in European capitals and in the United States as politicians try to stop the global financial meltdown. The crisis has grown into a major test for the government of Angela Merkel. On Monday, Berlin signed off on a major bailout package.
eeerie. In the long run, we're all dead. John Maynard Keynes
Record volumes of government bonds from the industrialised nations - intended to reverse what could be the worst recession since the Great Depression - threaten to curb access to credit markets by emerging economies.Analysts warn that emerging market borrowers could be crowded out of the credit markets by $3,000bn of government bonds expected to be issued by the big developed economies in 2009 - three times more than in 2008. The US alone is expected to issue about $2,000bn next year.Emerging market governments and corporates need to repay $6,865bn of debt in 2009, according to ING Wholesale Banking. This includes bonds, loans, interest payments and trade finance.David Spegel, global head of emerging markets strategy at ING, said: "Refinancing risk is going to be one of the biggest problems for emerging market issuers in 2009.
Analysts warn that emerging market borrowers could be crowded out of the credit markets by $3,000bn of government bonds expected to be issued by the big developed economies in 2009 - three times more than in 2008. The US alone is expected to issue about $2,000bn next year.
Emerging market governments and corporates need to repay $6,865bn of debt in 2009, according to ING Wholesale Banking. This includes bonds, loans, interest payments and trade finance.
David Spegel, global head of emerging markets strategy at ING, said: "Refinancing risk is going to be one of the biggest problems for emerging market issuers in 2009.
Is there a lesson there? In the long run, we're all dead. John Maynard Keynes
The pound dropped to a fresh low against the euro on Monday, falling closer to parity against the single currency on expectations that UK interest rates were heading lower. The pound has suffered against the euro, dropping a record 17 per cent this month, as investors bet that the Bank of England would slash interest rates, which stand at 2 per cent, at its policy meeting next month.Reports over the weekend suggesting that the UK economy could shed 600,000 jobs next year also weighed on sterling.The pound fell to a record low of £0.9799 against the euro before recovering some poise to stand down 1.9 per cent at £0.9770 by midday in New York.
The pound has suffered against the euro, dropping a record 17 per cent this month, as investors bet that the Bank of England would slash interest rates, which stand at 2 per cent, at its policy meeting next month.
Reports over the weekend suggesting that the UK economy could shed 600,000 jobs next year also weighed on sterling.
The pound fell to a record low of £0.9799 against the euro before recovering some poise to stand down 1.9 per cent at £0.9770 by midday in New York.
A year ago, Gazprom, the Russian natural gas monopoly, aspired to be the largest corporation in the world. Buoyed by high oil prices and political backing from the Kremlin, it had already achieved third place judging by market capitalization, behind Exxon Mobil and General Electric. Today, Gazprom is deep in debt and negotiating a government bailout. Its market cap, the total value of all the company's shares, has fallen 76 percent since the beginning of the year. Instead of becoming the world's largest company, it has tumbled to 35th place. And while bailouts are increasingly common, none of Gazprom's big private sector competitors in the West is looking for one. That Russia's largest state-run energy company needs a bailout so soon after oil hit record highs last summer is a telling postscript to a turbulent period. Once the emblem of the pride and the menace of a resurgent Russia, Gazprom has become a symbol of this oil state's rapid economic decline.
A year ago, Gazprom, the Russian natural gas monopoly, aspired to be the largest corporation in the world. Buoyed by high oil prices and political backing from the Kremlin, it had already achieved third place judging by market capitalization, behind Exxon Mobil and General Electric.
Today, Gazprom is deep in debt and negotiating a government bailout. Its market cap, the total value of all the company's shares, has fallen 76 percent since the beginning of the year. Instead of becoming the world's largest company, it has tumbled to 35th place. And while bailouts are increasingly common, none of Gazprom's big private sector competitors in the West is looking for one.
That Russia's largest state-run energy company needs a bailout so soon after oil hit record highs last summer is a telling postscript to a turbulent period. Once the emblem of the pride and the menace of a resurgent Russia, Gazprom has become a symbol of this oil state's rapid economic decline.
Chalk up another victim for the crashing real estate market: the easy divorce. With nearly one in six homes worth less than the mortgage owed on it, according to Moody's Economy.com, divorce lawyers and financial advisers around the country say the logistics of divorce have been turned around. "We used to fight about who gets to keep the house," said Gary Nickelson, president of the American Academy of Matrimonial Lawyers. "Now we fight about who gets stuck with the dead cow."As a result, divorce has become more complicated and often more expensive, with lower prospects for money on the other side. Some divorce lawyers say that business has slowed or that clients are deciding to stay together because there are no assets left to help them start over. "There's an old joke," said Randall M. Kessler, Ms. Needle's lawyer. "Why is a divorce so expensive? Because it's worth it. Now it better really be worth it." In a normal economy, couples typically build equity in their homes, then divide that equity in a divorce, either after selling the house or with one partner buying out the other's share. But after the recent boom-and-bust cycle, more couples own houses that neither spouse can afford to maintain, and that they cannot sell for what they owe. For couples already under stress, the family home has become a toxic asset.
Chalk up another victim for the crashing real estate market: the easy divorce.
With nearly one in six homes worth less than the mortgage owed on it, according to Moody's Economy.com, divorce lawyers and financial advisers around the country say the logistics of divorce have been turned around. "We used to fight about who gets to keep the house," said Gary Nickelson, president of the American Academy of Matrimonial Lawyers. "Now we fight about who gets stuck with the dead cow."
As a result, divorce has become more complicated and often more expensive, with lower prospects for money on the other side. Some divorce lawyers say that business has slowed or that clients are deciding to stay together because there are no assets left to help them start over.
"There's an old joke," said Randall M. Kessler, Ms. Needle's lawyer. "Why is a divorce so expensive? Because it's worth it. Now it better really be worth it."
In a normal economy, couples typically build equity in their homes, then divide that equity in a divorce, either after selling the house or with one partner buying out the other's share. But after the recent boom-and-bust cycle, more couples own houses that neither spouse can afford to maintain, and that they cannot sell for what they owe. For couples already under stress, the family home has become a toxic asset.
Hedge funds are bracing themselves for a raft of more stringent requirements by investors and increasing regulatory scrutiny, following the revelations this month that up to $50bn has been lost through alleged fraud by Bernard Madoff.Half a dozen lawsuits have been filed by Madoff investors, mainly focusing on the failure of due diligence by the middlemen, such as hedge fund of funds, which channelled money to Madoff. The affair is likely to lead to a crackdown on due diligence by fund of funds - which hold more than 40 per cent of hedge fund money - according to hedge fund marketers and advisers. One hedge fund adviser, who looked into investing with Madoff and declined, said: "This is just the start. Third party administrators, greater transparency in investments, more regulatory oversight - we can expect them all."
Half a dozen lawsuits have been filed by Madoff investors, mainly focusing on the failure of due diligence by the middlemen, such as hedge fund of funds, which channelled money to Madoff.
The affair is likely to lead to a crackdown on due diligence by fund of funds - which hold more than 40 per cent of hedge fund money - according to hedge fund marketers and advisers.
One hedge fund adviser, who looked into investing with Madoff and declined, said: "This is just the start. Third party administrators, greater transparency in investments, more regulatory oversight - we can expect them all."
