CAPE TOWN, South Africa (AP) -- South African President Thabo Mbeki says he has formally resigned, effective as soon as a new president is chosen.Mbeki spoke in a nationally televised address Sunday. A day earlier, his African National Congress had called on him to resign. He is leaving before his second and last constitutionally allowed term expires next year.Mbeki lost the final battle Saturday in a long power struggle with African National Congress president Jacob Zuma.Parliament will convene in the coming days to select an interim president before elections, which are scheduled for next year. Baleka Mbete, the speaker of the National Assembly and chairwoman of the ANC, is expected to take over.
CAPE TOWN, South Africa (AP) -- South African President Thabo Mbeki says he has formally resigned, effective as soon as a new president is chosen.
Mbeki spoke in a nationally televised address Sunday. A day earlier, his African National Congress had called on him to resign. He is leaving before his second and last constitutionally allowed term expires next year.
Mbeki lost the final battle Saturday in a long power struggle with African National Congress president Jacob Zuma.
Parliament will convene in the coming days to select an interim president before elections, which are scheduled for next year. Baleka Mbete, the speaker of the National Assembly and chairwoman of the ANC, is expected to take over.
Yes, Zuma and Mbeki have been struggling for top-dog position since Mbeki made Zuma his deputy president. It got worse when Mbeki discharged Zuma based on the pretext of Zuma's involvement of the corrupted arms deal - which, to this day, has not been proven in court, because Zuma has made delay tactics a new form of art. It reached fever pitch when Zuma was picked over Mbeki as the party's president.
Yet Mbeki's decision to resign has nothing do with a direct power struggle, but is the fall-out of a historical (and controversial I must add) court's decision in the Zuma trial on September 12. According to the judge, Mbeki intervened in the judiciary system to make sure Zuma got recharged. That's a massive faux-pas for a president. Zuma now wins, because Mbeki and the NPA were too blinded with determination to get rid of Zuma using the courts and made blunders to get their way. The NPA has announced they will appeal the judge's decision, but the damage already has been done.
Obviously AP puts this crucial bit of information on the very end:
The Associated Press: South Africa's Mbeki resigns after power struggle
Although Mbeki's removal came more quickly than many people expected, South Africans had been anticipating a shift from Mbeki to Zuma at least since last December, when Zuma defeated the president in an election for the ANC leadership.Mbeki fired Zuma as his national deputy president in 2005, after Zuma's financial adviser was convicted of trying to elicit a bribe to deflect investigations into the arms deal.Initial charges against Zuma were withdrawn, but the chief prosecutor said last December that he had enough evidence to bring new ones. A judge threw out the new charges last week and implied they were the result of political interference.
Although Mbeki's removal came more quickly than many people expected, South Africans had been anticipating a shift from Mbeki to Zuma at least since last December, when Zuma defeated the president in an election for the ANC leadership.
Mbeki fired Zuma as his national deputy president in 2005, after Zuma's financial adviser was convicted of trying to elicit a bribe to deflect investigations into the arms deal.
Initial charges against Zuma were withdrawn, but the chief prosecutor said last December that he had enough evidence to bring new ones. A judge threw out the new charges last week and implied they were the result of political interference.
JERUSALEM (Reuters) - Israeli Prime Minister Ehud Olmert handed his resignation to President Shimon Peres on Sunday but the scandal-hit premier could stay in office for weeks or months until a new government is formed. "Prime Minister Ehud Olmert submitted his resignation to me tonight," Peres told reporters at his Jerusalem residence. Olmert, who faces criminal indictment in corruption probes, said earlier at the weekly cabinet session he was stepping down "in accordance with good governance" and history would judge the achievements of his administration.
JERUSALEM (Reuters) - Israeli Prime Minister Ehud Olmert handed his resignation to President Shimon Peres on Sunday but the scandal-hit premier could stay in office for weeks or months until a new government is formed.
"Prime Minister Ehud Olmert submitted his resignation to me tonight," Peres told reporters at his Jerusalem residence.
Olmert, who faces criminal indictment in corruption probes, said earlier at the weekly cabinet session he was stepping down "in accordance with good governance" and history would judge the achievements of his administration.
WASHINGTON (Reuters) - Treasury Secretary Henry Paulson took his case for an unprecedented $700 billion bailout of financial markets to the American people on Sunday, saying it was needed to prevent further damage to an already fragile economy. "This is not something that we wanted to do. This was something that was very necessary," Paulson said on the NBC Sunday program "Meet the Press." "We did this to protect the taxpayer." The sweeping Bush administration plan would have the Treasury buy up bad mortgage-related debts from financial institutions to try to stem the worst financial storm since the Great Depression. Paulson said U.S. authorities were pressing other governments to take similar actions.
WASHINGTON (Reuters) - Treasury Secretary Henry Paulson took his case for an unprecedented $700 billion bailout of financial markets to the American people on Sunday, saying it was needed to prevent further damage to an already fragile economy.
"This is not something that we wanted to do. This was something that was very necessary," Paulson said on the NBC Sunday program "Meet the Press."
"We did this to protect the taxpayer."
The sweeping Bush administration plan would have the Treasury buy up bad mortgage-related debts from financial institutions to try to stem the worst financial storm since the Great Depression.
Paulson said U.S. authorities were pressing other governments to take similar actions.
Stock markets around the world roared their approval on Friday, staging huge rallies as the US authorities moved towards agreement on a programme of government intervention that would put hundreds of billions of dollars of taxpayers' money at risk in an effort to quell the credit crisis.
German politicians are skeptical about a $700 billion US bailout of markets and of calls to take similar measures as Chancellor Merkel criticized Washington for failing to implement stringent market controls. A growing chorus of German politicians questioned over the weekend whether the unprecedented US rescue package meant to inject liquidity into the financial system w
A growing chorus of German politicians questioned over the weekend whether the unprecedented US rescue package meant to inject liquidity into the financial system w
Many economists skeptical of bailout Avi Zenilman Sun Sep 21, 8:58 AM ET IN Yahoo's POLITICO Many of the same economists and opinion-makers who'd provided a bipartisan sheen of consensus to Treasury Secretary Henry Paulson's previous moves have quickly begun casting doubts on the wisdom of a policy that would allow Treasury to purchase without oversight hundreds of billions of dollars of difficult-to-price assets from financial institutions. "We need to take a bold move. In that sense I think Paulson is right," Luigi Zingales, a Professor at the University of Chicago School of Business who wrote a widely circulated short essay titled "Why Paulson is Wrong," told Politico. Zingales fears that the Treasury bailout would effectively turn the entire financial sector into a Government Sponsored Enterprise, complete with the same murkiness and moral hazard that sunk Fannie Mae and Freddie Mac. "It might achieve the final outcome, but it will do so at an enormous cost," he said. "All the troubles we've seen with Fannie and Freddie would be seen again and again across the entire financial sector." President Bush is "asking for a huge amount of power," said Nouriel Roubini, an economist at New York University who was among the first to predict the crisis. "He's saying, `Trust me, I'm going to do it right if you give me absolute control.' This is not a monarchy." (Roubini told the New York Times that despite these concerns, he also thought the plan could help stave off a recession.) Paul Krugman, the Princeton University economist and liberal columnist for The New York Times who had until now been cautiously supportive of Paulson's and Federal Reserve Chairman Ben Bernanke's efforts to prop up the system, wrote that the new plan would be a taxpayer rip-off. "I hate to say this, but looking at the plan as leaked, I have to say no deal," he wrote on his blog at 4:46 p.m. Saturday. "Not unless Treasury explains, very clearly, why this is supposed to work, other than through having taxpayers pay premium prices for lousy assets." Yves Smith, a longtime banker and contributor to the influential finance blog Naked Capitalism, published an angry post there titled, "Why You Should Hate The Treasury Bailout Proposal": "Given that continuing to buy U.S. assets will come under increasingly harsh scrutiny overseas, the U.S. needs to bend over backwards to devise a plan that at least looks credible in terms of directing the funds that come from taxpayers and lenders to their highest and best uses and implementing reforms that will restore active and prudent oversight of financial firms," she wrote. "The administration's demand for a free pass, even if Congress unwisely goes along, is likely to backfire with our foreign creditors." -Skip- Sebastian Mallaby, the center-right economic columnist for The Washington Post and scholar of the modern financial system, was equally dubious. "The plan is being marketed under false pretenses," he wrote in his Sunday column, rejecting comparisons of the plan to the Resolution Trust Corporation, which the government formed in response to the savings and loan crisis to purchase and sell off the bad loans made by bankrupted thrifts. "The administration proposes to buy up bad loans before the lenders go bust," Mallaby noted, keeping the banks alive but doing little to solve the problem infecting the markets. "Bad loans are weighing down the financial system precisely because private-sector experts can't determine their worth. The government would have no better handle on the problem." Justin Fox, Time magazine's top financial writer and columnist, also worried about the lack of an upside for the taxpayer. "What I still can't figure out is how Treasury hopes to structure the bailout so there's at least a chance of getting a fair return on that risk-taking," he wrote on his blog. -Skip- Zingales, though, writes in "Why Paulson Is Wrong" that "For somebody like me who believes strongly in the free market system, the most serious risk of the current situation is that the interest of a few financiers will undermine the fundamental workings of the capitalist system. The time has come to save capitalism from the capitalists."
Avi Zenilman Sun Sep 21, 8:58 AM ET IN Yahoo's POLITICO
Many of the same economists and opinion-makers who'd provided a bipartisan sheen of consensus to Treasury Secretary Henry Paulson's previous moves have quickly begun casting doubts on the wisdom of a policy that would allow Treasury to purchase without oversight hundreds of billions of dollars of difficult-to-price assets from financial institutions. "We need to take a bold move. In that sense I think Paulson is right," Luigi Zingales, a Professor at the University of Chicago School of Business who wrote a widely circulated short essay titled "Why Paulson is Wrong," told Politico.
Zingales fears that the Treasury bailout would effectively turn the entire financial sector into a Government Sponsored Enterprise, complete with the same murkiness and moral hazard that sunk Fannie Mae and Freddie Mac. "It might achieve the final outcome, but it will do so at an enormous cost," he said. "All the troubles we've seen with Fannie and Freddie would be seen again and again across the entire financial sector."
President Bush is "asking for a huge amount of power," said Nouriel Roubini, an economist at New York University who was among the first to predict the crisis. "He's saying, `Trust me, I'm going to do it right if you give me absolute control.' This is not a monarchy." (Roubini told the New York Times that despite these concerns, he also thought the plan could help stave off a recession.)
Paul Krugman, the Princeton University economist and liberal columnist for The New York Times who had until now been cautiously supportive of Paulson's and Federal Reserve Chairman Ben Bernanke's efforts to prop up the system, wrote that the new plan would be a taxpayer rip-off. "I hate to say this, but looking at the plan as leaked, I have to say no deal," he wrote on his blog at 4:46 p.m. Saturday. "Not unless Treasury explains, very clearly, why this is supposed to work, other than through having taxpayers pay premium prices for lousy assets."
Yves Smith, a longtime banker and contributor to the influential finance blog Naked Capitalism, published an angry post there titled, "Why You Should Hate The Treasury Bailout Proposal":
"Given that continuing to buy U.S. assets will come under increasingly harsh scrutiny overseas, the U.S. needs to bend over backwards to devise a plan that at least looks credible in terms of directing the funds that come from taxpayers and lenders to their highest and best uses and implementing reforms that will restore active and prudent oversight of financial firms," she wrote. "The administration's demand for a free pass, even if Congress unwisely goes along, is likely to backfire with our foreign creditors."
-Skip-
Sebastian Mallaby, the center-right economic columnist for The Washington Post and scholar of the modern financial system, was equally dubious. "The plan is being marketed under false pretenses," he wrote in his Sunday column, rejecting comparisons of the plan to the Resolution Trust Corporation, which the government formed in response to the savings and loan crisis to purchase and sell off the bad loans made by bankrupted thrifts.
"The administration proposes to buy up bad loans before the lenders go bust," Mallaby noted, keeping the banks alive but doing little to solve the problem infecting the markets. "Bad loans are weighing down the financial system precisely because private-sector experts can't determine their worth. The government would have no better handle on the problem."
Justin Fox, Time magazine's top financial writer and columnist, also worried about the lack of an upside for the taxpayer. "What I still can't figure out is how Treasury hopes to structure the bailout so there's at least a chance of getting a fair return on that risk-taking," he wrote on his blog.
Zingales, though, writes in "Why Paulson Is Wrong" that "For somebody like me who believes strongly in the free market system, the most serious risk of the current situation is that the interest of a few financiers will undermine the fundamental workings of the capitalist system. The time has come to save capitalism from the capitalists."
The logic of the crisis seems to call for an intervention, not at step 4, but at step 2: the financial system needs more capital. And if the government is going to provide capital to financial firms, it should get what people who provide capital are entitled to -- a share in ownership, so that all the gains if the rescue plan works don't go to the people who made the mess in the first place. That's what happened in the savings and loan crisis: the feds took over ownership of the bad banks, not just their bad assets. It's also what happened with Fannie and Freddie. (And by the way, that rescue has done what it was supposed to. Mortgage interest rates have come down sharply since the federal takeover.)But Mr. Paulson insists that he wants a "clean" plan. "Clean," in this context, means a taxpayer-financed bailout with no strings attached -- no quid pro quo on the part of those being bailed out. Why is that a good thing? Add to this the fact that Mr. Paulson is also demanding dictatorial authority, plus immunity from review "by any court of law or any administrative agency," and this adds up to an unacceptable proposal.
The logic of the crisis seems to call for an intervention, not at step 4, but at step 2: the financial system needs more capital. And if the government is going to provide capital to financial firms, it should get what people who provide capital are entitled to -- a share in ownership, so that all the gains if the rescue plan works don't go to the people who made the mess in the first place.
That's what happened in the savings and loan crisis: the feds took over ownership of the bad banks, not just their bad assets. It's also what happened with Fannie and Freddie. (And by the way, that rescue has done what it was supposed to. Mortgage interest rates have come down sharply since the federal takeover.)
But Mr. Paulson insists that he wants a "clean" plan. "Clean," in this context, means a taxpayer-financed bailout with no strings attached -- no quid pro quo on the part of those being bailed out. Why is that a good thing? Add to this the fact that Mr. Paulson is also demanding dictatorial authority, plus immunity from review "by any court of law or any administrative agency," and this adds up to an unacceptable proposal.
We Gambled. You Pay. Jesus' General
Of course, there are some who think the wealthy do not deserve to take our piece of the American Dream: ...first thing on Monday morning, [everyone] needs to call their Representatives and Senators and say: No. Blank. Checks. For. Crooks. Be as polite as you can be and don't use bad words. Personally, this injunction may limit the duration of my calls to under a thirtieth of a second, or shorter. Congressional phone numbers. Update: Scarecrow has more: The most important condition to put on any bailout proposal is to impose a tax surcharge on the incomes of the wealthiest Americans to pay the bailout's cost. And just go read Avedon.
...first thing on Monday morning, [everyone] needs to call their Representatives and Senators and say: No. Blank. Checks. For. Crooks.
Be as polite as you can be and don't use bad words. Personally, this injunction may limit the duration of my calls to under a thirtieth of a second, or shorter.
Congressional phone numbers.
Update: Scarecrow has more: The most important condition to put on any bailout proposal is to impose a tax surcharge on the incomes of the wealthiest Americans to pay the bailout's cost. And just go read Avedon.
Frank Delaney ~ Ireland
The way I put it is this... Why is is okay to recapitalize a company by appealing to foreign "Sovereign Wealth", but in the case of domestic "Sovereign Wealth" it would be "Nationalisation" and therefore evil? A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
A Fine Mess - Op-Ed - NYTimes.com
... is the administration's proposal the right way to do this? It would enable the Treasury, without Congressionally approved guidelines as to pricing or procedure, to purchase hundreds of billions of dollars of financial assets, and hire private firms to manage and sell them, presumably at their discretion There are no provisions for -- or even promises of -- disclosure, accountability or transparency. Surely Congress can at least ask some hard questions about such an open-ended commitment. And I've been shocked by the number of (mostly conservative) experts I've spoken with who aren't at all confident that the Bush administration has even the basics right -- or who think that the plan, though it looks simple on paper, will prove to be a nightmare in practice. But will political leaders dare oppose it?
... is the administration's proposal the right way to do this? It would enable the Treasury, without Congressionally approved guidelines as to pricing or procedure, to purchase hundreds of billions of dollars of financial assets, and hire private firms to manage and sell them, presumably at their discretion There are no provisions for -- or even promises of -- disclosure, accountability or transparency. Surely Congress can at least ask some hard questions about such an open-ended commitment.
And I've been shocked by the number of (mostly conservative) experts I've spoken with who aren't at all confident that the Bush administration has even the basics right -- or who think that the plan, though it looks simple on paper, will prove to be a nightmare in practice.
But will political leaders dare oppose it?
America's Own Kleptocracy By MICHAEL HUDSON (excerpted from CounterPunch) -skip- What a two weeks! On Sunday, September 7, the Treasury took on the $5.3 trillion mortgage exposure of Fannie Mae and Freddie Mac, whose heads already had been removed for accounting fraud. On Monday, September 15, Lehman Brothers went bankrupt, when prospective Wall Street buyers couldn't gain any sense of reality from its financial books. On Wednesday the Federal Reserve agreed to make good for at least $85 billion in the just-pretend "insured" winnings owed to financial gamblers who bet on computer-driven trades in junk mortgages and bought counter-party coverage from the A.I.G. (the American International Group, whose head Maurice Greenberg already had been removed a few years back for accounting fraud). But it is Friday, September 19, that will go down as a turning point in American history. The White House committed at least half a trillion dollars more to re-inflate real estate prices in an attempt to support the market value junk mortgages - mortgages issued far beyond the ability of debtors to pay and far above the going market price of the collateral being pledged. These billions of dollars were devoted to keeping a dream alive - the accounting fictions written down by companies that had entered an unreal world based on false accounting that nearly everyone in the financial sector knew to be fake. But they played along with buying and selling packaged mortgage junk because that was where the money was. Even after markets collapse, fund managers who steered clear were blamed for not playing the game while it was going. I have friends on Wall Street who were fired for not matching the returns that their compatriots were making. And the biggest returns were to be made in trading in the economy's largest financial asset - mortgage debt. The mortgages packaged, owned or guaranteed by Fannie and Freddie alone exceeded the entire U.S. national debt - the cumulative deficits run up by the American Government since the nation won the Revolutionary War! This gives an idea of just how large the bailout has been - and where the government's (or at least the Republicans') priorities lie! Instead of waking up the economy to reality, the government has thrown all its resources to promote the unreal dream that debts can be paid - if not by the debtors themselves, then by the government - "taxpayers," as the euphemism goes. -truncate-
-skip-
What a two weeks! On Sunday, September 7, the Treasury took on the $5.3 trillion mortgage exposure of Fannie Mae and Freddie Mac, whose heads already had been removed for accounting fraud. On Monday, September 15, Lehman Brothers went bankrupt, when prospective Wall Street buyers couldn't gain any sense of reality from its financial books. On Wednesday the Federal Reserve agreed to make good for at least $85 billion in the just-pretend "insured" winnings owed to financial gamblers who bet on computer-driven trades in junk mortgages and bought counter-party coverage from the A.I.G. (the American International Group, whose head Maurice Greenberg already had been removed a few years back for accounting fraud). But it is Friday, September 19, that will go down as a turning point in American history. The White House committed at least half a trillion dollars more to re-inflate real estate prices in an attempt to support the market value junk mortgages - mortgages issued far beyond the ability of debtors to pay and far above the going market price of the collateral being pledged.
These billions of dollars were devoted to keeping a dream alive - the accounting fictions written down by companies that had entered an unreal world based on false accounting that nearly everyone in the financial sector knew to be fake. But they played along with buying and selling packaged mortgage junk because that was where the money was. Even after markets collapse, fund managers who steered clear were blamed for not playing the game while it was going. I have friends on Wall Street who were fired for not matching the returns that their compatriots were making. And the biggest returns were to be made in trading in the economy's largest financial asset - mortgage debt. The mortgages packaged, owned or guaranteed by Fannie and Freddie alone exceeded the entire U.S. national debt - the cumulative deficits run up by the American Government since the nation won the Revolutionary War!
This gives an idea of just how large the bailout has been - and where the government's (or at least the Republicans') priorities lie! Instead of waking up the economy to reality, the government has thrown all its resources to promote the unreal dream that debts can be paid - if not by the debtors themselves, then by the government - "taxpayers," as the euphemism goes.
-truncate-
Last major investment banks change status By MARTIN CRUTSINGER, AP Economics Writer 1 hour, 24 minutes ago AP via Yahoo WASHINGTON - The Federal Reserve said Sunday it had granted a request by the country's last two major investment banks -- Goldman Sachs and Morgan Stanley -- to change their status to bank holding companies. ADVERTISEMENT The Fed announced that it had approved the request of the two investment banks. The change in status will allow them to create commercial banks that will be able to take deposits, bolstering the resources of both institutions. The change continued the biggest restructuring on Wall Street since the Great Depression. The request for the change to bank holding companies was granted by a unanimous vote of the Fed's board of governors during a late Sunday meeting in Washington. The change of status means both companies will come under the direct regulation of the Federal Reserve, which regulates the nation's bank holding companies. The banking subsidiaries of the two institutions will face the stricter regulations that commercial banks are required to meet. Previously, the primary regulator for Goldman and Morgan Stanley was the Securities and Exchange Commission.
WASHINGTON - The Federal Reserve said Sunday it had granted a request by the country's last two major investment banks -- Goldman Sachs and Morgan Stanley -- to change their status to bank holding companies. ADVERTISEMENT
The Fed announced that it had approved the request of the two investment banks. The change in status will allow them to create commercial banks that will be able to take deposits, bolstering the resources of both institutions.
The change continued the biggest restructuring on Wall Street since the Great Depression.
The request for the change to bank holding companies was granted by a unanimous vote of the Fed's board of governors during a late Sunday meeting in Washington.
The change of status means both companies will come under the direct regulation of the Federal Reserve, which regulates the nation's bank holding companies. The banking subsidiaries of the two institutions will face the stricter regulations that commercial banks are required to meet. Previously, the primary regulator for Goldman and Morgan Stanley was the Securities and Exchange Commission.
But who's going to want to put their deposits with MS or GS?
Nouriel Roubini has predicted GS and MS would go the way of Lehman and Merrill Lynch - either merging or being taken over by a commercial bank. After the rumours that Wachovia and MS were in merger talks, now GS and MS are trying to simply become commercial banks? A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
This is another naked attempt to grab federal insurance - aka a bailout - for their liabilities. Some creative accounting will move the debt from one place to another.
They're probably hoping that with Paulson's planned new superpowers they won't be held accountable.
But given that no one is buying Paulson's beatification - not even Newt Gingrich - the plan may not be the success they're hoping for.
I think that's right. The key is this line from the FT story I quote in my parallel comment:
During the transition period, the Fed will make loans to both entities and to the broker-dealer subsidiary of Merrill Lynch against collateral acceptable for posting either by a bank or a securities firm.
In a statement issued at 9.30pm Sunday, the Federal Reserve said it had approved their applications to become bank holding companies, subject to regulation by the Fed. During the transition period, the Fed will make loans to both entities and to the broker-dealer subsidiary of Merrill Lynch against collateral acceptable for posting either by a bank or a securities firm. The Fed will also lend to Goldman, Morgan and Merrill's London-based broker dealer subsidiaries directly. The Fed approval is subject to a five-day waiting period for potential antitrust issues.
The Fed will also lend to Goldman, Morgan and Merrill's London-based broker dealer subsidiaries directly.
The Fed approval is subject to a five-day waiting period for potential antitrust issues.
Investment bank Morgan Stanley said Monday it signed a letter of intent to sell up to 20 percent of the company to Mitsubishi UFJ Financial Group Inc. Financial terms of the deal were not disclosed. If the deal is completed, the price would be based on Morgan Stanley's book value after Japan's largest bank completes a due diligence review. The letter of intent signed by both banks is nonbinding. The framework for a deal comes just hours after Morgan Stanley, one of Wall Street's biggest investment banks, received regulatory approval from the Federal Reserve to become a bank holding company -- making it a commercial bank and allowing it to receive deposits. Morgan Stanley will also now be regulated by the Fed instead of the Securities and Exchange Commission.
Financial terms of the deal were not disclosed. If the deal is completed, the price would be based on Morgan Stanley's book value after Japan's largest bank completes a due diligence review. The letter of intent signed by both banks is nonbinding.
The framework for a deal comes just hours after Morgan Stanley, one of Wall Street's biggest investment banks, received regulatory approval from the Federal Reserve to become a bank holding company -- making it a commercial bank and allowing it to receive deposits. Morgan Stanley will also now be regulated by the Fed instead of the Securities and Exchange Commission.
I'm getting a very uneasy feeling about all this.
:-)
... the more I think about this, the more skeptical I get about the extent to which it's a solution. Problems: (a) Although the problem starts with mortgage-backed securities, the range of assets whose prices are being driven down by deleveraging is much broader than MBS. So this only cuts off, at most, part of the vicious circle. (b) Anyway, the vicious circle aspect is only part of the larger problem, and arguably not the most important part. Even without panic asset selling, the financial system would be seriously undercapitalized, causing a credit crunch -- and this plan does nothing to address that. Or I should say, the plan does nothing to address the lack of capital unless the Treasury overpays for assets. And if that's the real plan, Congress has every right to balk. <...> Let's not be railroaded into accepting an enormously expensive plan that doesn't seem to address the real problem.
... the more I think about this, the more skeptical I get about the extent to which it's a solution. Problems:
(a) Although the problem starts with mortgage-backed securities, the range of assets whose prices are being driven down by deleveraging is much broader than MBS. So this only cuts off, at most, part of the vicious circle.
(b) Anyway, the vicious circle aspect is only part of the larger problem, and arguably not the most important part. Even without panic asset selling, the financial system would be seriously undercapitalized, causing a credit crunch -- and this plan does nothing to address that.
Or I should say, the plan does nothing to address the lack of capital unless the Treasury overpays for assets. And if that's the real plan, Congress has every right to balk.
<...>
Let's not be railroaded into accepting an enormously expensive plan that doesn't seem to address the real problem.
The fear index is not merely an indicator. The Chicago Exchange does a steady business trading bets on whether the VIX will go up or down. In these strange times, you can essentially buy and sell fear. <...> The computer spits out a number called the volatility index, or VIX. It's a reading of how scared people are. "That's in fact what it measures," Whaley said. That reading provides insight into future wavering in the market, what traders call volatility. The details of Whaley's formula are complicated. The VIX gets its magic number by analyzing the price of a kind of insurance policy against stock market declines. "What VIX measures, to some extent, is the amount people are willing to pay for insurance," he explained. On Thursday, Whaley stared at numbers from a fairly nervous market. The VIX indicated people thought the stock market might go up or down by almost 9 percent over the next 30 days. <...> Another measure of market anxiety is called the TED Spread. By considering the demand for Treasury bills, the euro and the dollar, it renders a number on how scared banks are that another bank might collapse. Jeff Frankel, an economist at Harvard, said that for years the TED Spread was tiny and steady and dull. "It always used to be very boring," he said, "so I never used to keep an eye on it at all. It's not boring now." Sometime around June 2007, he remembers, the TED Spread shot up -- and stayed high. "You know, for it to shoot up temporarily is OK," he said. "But for it to stay up! It is really quite remarkable. It's one reason why people say this is the worst financial crisis since the Great Depression, because so far as I know this has not happened before."
The computer spits out a number called the volatility index, or VIX. It's a reading of how scared people are. "That's in fact what it measures," Whaley said. That reading provides insight into future wavering in the market, what traders call volatility.
The details of Whaley's formula are complicated. The VIX gets its magic number by analyzing the price of a kind of insurance policy against stock market declines. "What VIX measures, to some extent, is the amount people are willing to pay for insurance," he explained.
On Thursday, Whaley stared at numbers from a fairly nervous market. The VIX indicated people thought the stock market might go up or down by almost 9 percent over the next 30 days.
Another measure of market anxiety is called the TED Spread. By considering the demand for Treasury bills, the euro and the dollar, it renders a number on how scared banks are that another bank might collapse.
Jeff Frankel, an economist at Harvard, said that for years the TED Spread was tiny and steady and dull. "It always used to be very boring," he said, "so I never used to keep an eye on it at all. It's not boring now."
Sometime around June 2007, he remembers, the TED Spread shot up -- and stayed high. "You know, for it to shoot up temporarily is OK," he said. "But for it to stay up! It is really quite remarkable. It's one reason why people say this is the worst financial crisis since the Great Depression, because so far as I know this has not happened before."
Jewish 'ultras' defend morals with menace; The Haredi sect has launched an aggressive campaign against the secular lifestyles of women in Jerusalem.
Nothing new that hasn't appeared in the Israeli and Jewish press over the last few years, but I think that this is the first time I've seen an article like this in the general press. The Guardian even mentions the "Frumka", the Jewish version of the burka, though without using this tongue-in-cheek name.
Much of Kreus's time is spent checking out reports of illicit use of new technologies by members of the Haredi community. 'If we discover someone has a computer at home we throw the children out of school,' he said. Enforcing dictates on women's behaviour is another vital part of his brief. ... Extraordinarily, he admitted to slashing the tyres of women who have driven into the neighbourhood who, he said, were indecently dressed. 'There was a mess with the police,' he said. 'Now I'm trying new creative methods, not using violence. Now I make a small hole in their tyres and the air deflates slowly. I'm not destroying their car.' ... He maintained that separation was necessary beyond the boundaries of the neighbourhood. 'Having secular people on the buses is a problem. They go like animals, without clothes. Non-religious girls don't dress properly. They encourage me to sin,' he said.
...
Extraordinarily, he admitted to slashing the tyres of women who have driven into the neighbourhood who, he said, were indecently dressed. 'There was a mess with the police,' he said. 'Now I'm trying new creative methods, not using violence. Now I make a small hole in their tyres and the air deflates slowly. I'm not destroying their car.'
He maintained that separation was necessary beyond the boundaries of the neighbourhood. 'Having secular people on the buses is a problem. They go like animals, without clothes. Non-religious girls don't dress properly. They encourage me to sin,' he said.
Bloomberg.com: Latin America
Sept. 20 (Bloomberg) -- Ecuador registered a budget surplus in the first half that will allow the government to keep investing, President Rafael Correa said. Ecuador's central government had a surplus of $508 million and public-sector entities such as municipalities and state-run universities had a $2.17 billion surplus, he said today in his weekly television address. ``This surplus is excessive,'' Correa said. ``We have to boost our efficiency in investing.'' On Sept. 28, Ecuador will hold a referendum on a new constitution that calls for raising spending on health and education. Correa this week replaced Finance Minister Wilma Salgado after she said that Ecuador faces a budget deficit of about $2.4 billion next year and recommended slowing the pace of spending.
Sept. 20 (Bloomberg) -- Ecuador registered a budget surplus in the first half that will allow the government to keep investing, President Rafael Correa said.
Ecuador's central government had a surplus of $508 million and public-sector entities such as municipalities and state-run universities had a $2.17 billion surplus, he said today in his weekly television address.
``This surplus is excessive,'' Correa said. ``We have to boost our efficiency in investing.''
On Sept. 28, Ecuador will hold a referendum on a new constitution that calls for raising spending on health and education. Correa this week replaced Finance Minister Wilma Salgado after she said that Ecuador faces a budget deficit of about $2.4 billion next year and recommended slowing the pace of spending.
TOKYO (AP) -- Brash conservative Taro Aso easily won the presidency of Japan's struggling ruling party Monday, putting him in line to take over as prime minister this week amid political and economic turmoil. ...Fukuda is quitting after a year of battling with a split parliament. The LDP runs the powerful lower house, but the opposition took control of the upper house in elections last year, and has repeatedly embarrassed his government by blocking or delaying high-profile legislation. ...Koizumi's nationalist successor, Shinzo Abe, quit after only a year amid scandals and his own health troubles. The dour Fukuda, considered at first an experienced hand, has failed to energize the party or draw voter interest. Aso, however, is likely to make headlines from day one. He has riled Beijing by calling China a military threat, angered Asians by claiming that Taiwan's educational success is rooted in Japanese wartime colonial policies, and compared Japan's opposition party to the Nazis.
...Fukuda is quitting after a year of battling with a split parliament. The LDP runs the powerful lower house, but the opposition took control of the upper house in elections last year, and has repeatedly embarrassed his government by blocking or delaying high-profile legislation.
...Koizumi's nationalist successor, Shinzo Abe, quit after only a year amid scandals and his own health troubles. The dour Fukuda, considered at first an experienced hand, has failed to energize the party or draw voter interest.
Aso, however, is likely to make headlines from day one.
He has riled Beijing by calling China a military threat, angered Asians by claiming that Taiwan's educational success is rooted in Japanese wartime colonial policies, and compared Japan's opposition party to the Nazis.
As I read what's happening now, John McCain is denouncing the Paulson plan, while Barack Obama -- out of a sense of responsibility for the financial system -- is only offering cautious criticism. The Obama people -- and the Congressional Democrats -- do know that the Republicans will run a populist campaign against them on the basis that they voted for a horrible big-government program, don't they?
The Obama people -- and the Congressional Democrats -- do know that the Republicans will run a populist campaign against them on the basis that they voted for a horrible big-government program, don't they?
If they agree to the bailout plan they'll be attacked as big government by McCain and rebuked by their own angry base. If they don't agree, when things go south again Bush will say that the Democratic congress, by inaction, made the crisis worse. A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
You mean you think the Democratic party base wants Paulson's bailout plan to go through as is? Point n'est besoin d'espérer pour entreprendre, ni de réussir pour persévérer. - Charles le Téméraire
Also, McCain will accuse them of inaction if they don't vote for it. Republicans don't have a problem arguing two contradictory positions, as long as it's not at the same time. A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
Reid thinks the plan is just perfect.
Obama is speechifying - he can't do much more than that, but we'll see more of the real Obama when he votes.
Which is... when?
CBS News: Reid Slams Bush Economic Policies, Promises Cooperation On Bailout (September 20, 2008)
Senate Majority Leader Harry Reid (D-Nev.) couldn't pass up a chance to slam President Bush's economic policies, but he promised that Senate Democrats would move quickly to take up the $700 billion Treasury bailout plan. ... "It is now self-evident that the Bush Administration's extreme hands-off policies have been disastrous," Reid said in a statement released by his office. "The middle class is suffering from rising prices and declining incomes, and now the world financial system is on the brink. The American people have every right to be outraged that we are at this point." Reid added: "At the same time, we cannot allow ourselves to be in denial about the threat now facing the world economy. From all indications, that threat is real, and the consequences of inaction could be catastrophic.
"It is now self-evident that the Bush Administration's extreme hands-off policies have been disastrous," Reid said in a statement released by his office. "The middle class is suffering from rising prices and declining incomes, and now the world financial system is on the brink. The American people have every right to be outraged that we are at this point."
Reid added: "At the same time, we cannot allow ourselves to be in denial about the threat now facing the world economy. From all indications, that threat is real, and the consequences of inaction could be catastrophic.
The trial of a wealthy Venezuelan businessman accused of being an illegal agent for the socialist government of President Hugo Chávez is unfolding like a political `telenovela.' ... The prosecution's case against Duran, 40, includes highly sensitive allegations that Venezuelan President Hugo Chávez oversaw the cover-up -- with input from Argentina -- and that Duran and a business partner had paid millions of dollars in bribes and kickbacks to Venezuelan officials in return for government contracts. ... Ultimately, observers say, the trial could diminish Chávez's stature in his own country, along with that of the intended recipient of his alleged campaign gift: Argentine President Cristina Fernández de Kirchner. Chávez's alleged gift, financed with national oil money, was designed to expand his leftist revolution, experts say. Both politicians have called the U.S. case ``garbage.''
The prosecution's case against Duran, 40, includes highly sensitive allegations that Venezuelan President Hugo Chávez oversaw the cover-up -- with input from Argentina -- and that Duran and a business partner had paid millions of dollars in bribes and kickbacks to Venezuelan officials in return for government contracts.
Ultimately, observers say, the trial could diminish Chávez's stature in his own country, along with that of the intended recipient of his alleged campaign gift: Argentine President Cristina Fernández de Kirchner. Chávez's alleged gift, financed with national oil money, was designed to expand his leftist revolution, experts say.
Both politicians have called the U.S. case ``garbage.''
Will S&P downgrade the US? Perhaps the question is better posed: why hasn't it already? Inevitably because no matter what the rating criteria say, the US AAA is surely too sacred a cow to be slaughtered. It would be an earth-shattering decision to take, and one that S&P's sovereign rating committee could not make alone. Then again, as S&P's sovereign rating committee chairman said only last week, the US AAA is no god-given gift.
Perhaps the question is better posed: why hasn't it already?
Inevitably because no matter what the rating criteria say, the US AAA is surely too sacred a cow to be slaughtered. It would be an earth-shattering decision to take, and one that S&P's sovereign rating committee could not make alone.
Then again, as S&P's sovereign rating committee chairman said only last week, the US AAA is no god-given gift.
Lots of fun stuff in here...
Admit it, mes amis, the rugged individualism and cutthroat capitalism that made America the land of unlimited opportunity has been shrink-wrapped by a half dozen short sellers in Greenwich, Conn. and FedExed to Washington D.C. to be spoon-fed back to life by Fed Chairman Ben Bernanke and Treasury Secretary Hank Paulson. We're now no different from any of those Western European semi-socialist welfare states that we love to deride. Italy? Sure, it's had four governments since last Thursday, but none of them would have allowed this to go on; the Italians know how to rig an economy. You just know the Frogs have only increased their disdain for us, if that is indeed possible. And why shouldn't they? The average American is working two and half jobs, gets two weeks off, and has all the employment security of a one-armed trapeze artist. The Bush Administration has preached the "ownership society" to America: own your house, own your retirement account; you don't need the government in your way. So Americans mortgaged themselves to the hilt to buy overpriced houses they can no longer afford and signed up for 401k programs that put money where, exactly? In the stock market! Where rich Republicans fleeced them. ...... We've always dismissed the French as exquisitely fed wards of their welfare state. They work, what, 27 hours in a good week, have 19 holidays a month, go on strike for two days and enjoy a glass of wine every day with lunch -- except for the 25% of the population that works for the government, who have an even sweeter deal. They retire before their kids finish high school, and they don't have to save for a $45,000-a-year college tuition because college is free. For this, they pay a tax rate of about 103%, and their labor laws are so restrictive that they haven't had a net gain in jobs since Napoleon. There is no way that the French government can pay for this lifestyle forever, except that it somehow does.
You just know the Frogs have only increased their disdain for us, if that is indeed possible. And why shouldn't they? The average American is working two and half jobs, gets two weeks off, and has all the employment security of a one-armed trapeze artist. The Bush Administration has preached the "ownership society" to America: own your house, own your retirement account; you don't need the government in your way. So Americans mortgaged themselves to the hilt to buy overpriced houses they can no longer afford and signed up for 401k programs that put money where, exactly? In the stock market! Where rich Republicans fleeced them.
......
We've always dismissed the French as exquisitely fed wards of their welfare state. They work, what, 27 hours in a good week, have 19 holidays a month, go on strike for two days and enjoy a glass of wine every day with lunch -- except for the 25% of the population that works for the government, who have an even sweeter deal. They retire before their kids finish high school, and they don't have to save for a $45,000-a-year college tuition because college is free. For this, they pay a tax rate of about 103%, and their labor laws are so restrictive that they haven't had a net gain in jobs since Napoleon. There is no way that the French government can pay for this lifestyle forever, except that it somehow does.
Back to reality. You can't be me, I'm taken
For those who might not recognize the reference ;-) You can't be me, I'm taken
Release Date: September 21, 2008 For release at 9:30 p.m. EDT The Federal Reserve Board on Sunday approved, pending a statutory five-day antitrust waiting period, the applications of Goldman Sachs and Morgan Stanley to become bank holding companies. To provide increased liquidity support to these firms as they transition to managing their funding within a bank holding company structure, the Federal Reserve Board authorized the Federal Reserve Bank of New York to extend credit to the U.S. broker-dealer subsidiaries of Goldman Sachs and Morgan Stanley against all types of collateral that may be pledged at the Federal Reserve's primary credit facility for depository institutions or at the existing Primary Dealer Credit Facility (PDCF); the Federal Reserve has also made these collateral arrangements available to the broker-dealer subsidiary of Merrill Lynch. In addition, the Board also authorized the Federal Reserve Bank of New York to extend credit to the London-based broker-dealer subsidiaries of Goldman Sachs, Morgan Stanley, and Merrill Lynch against collateral that would be eligible to be pledged at the PDCF.
The Federal Reserve Board on Sunday approved, pending a statutory five-day antitrust waiting period, the applications of Goldman Sachs and Morgan Stanley to become bank holding companies.
To provide increased liquidity support to these firms as they transition to managing their funding within a bank holding company structure, the Federal Reserve Board authorized the Federal Reserve Bank of New York to extend credit to the U.S. broker-dealer subsidiaries of Goldman Sachs and Morgan Stanley against all types of collateral that may be pledged at the Federal Reserve's primary credit facility for depository institutions or at the existing Primary Dealer Credit Facility (PDCF); the Federal Reserve has also made these collateral arrangements available to the broker-dealer subsidiary of Merrill Lynch. In addition, the Board also authorized the Federal Reserve Bank of New York to extend credit to the London-based broker-dealer subsidiaries of Goldman Sachs, Morgan Stanley, and Merrill Lynch against collateral that would be eligible to be pledged at the PDCF.
CR is incorrect. The result is neither more oversight nor a change in the firms' business models. Being financial holding companies (per GLB Act) both firms were supervised by the FRB and the SEC and, informally, the Presidents Working Group (PWG a/k/a "the Plunge Protection Team"). But Paulson's "Blueprint" does explicitly seek expansion of the PWG. The latter observation implies only that regulators will recommend that the firms acquire state- and national-chartered banks and perhaps apply for charters for some of their existing banking and trust subsidiaries. Further, this measure does not revoke firms' privileged brokerage licenses. Rather, it cements market risk in depository institutions --all of whose undercapitalized operations were regulated by the FRB.
BAC ("core bank") and Merrill last week agreed in principle to a merger. "Core bank" is an OCC class.
From American Banker subscription, H/T Jesse:
Goldman did not say what sort of banking charter it would use, but Morgan Stanley said it plans to convert its Utah industrial bank to a national bank charter. Morgan Stanley said it had more than 3 million retail accounts and $36 billion in bank deposits as of Aug. 31. It did not reveal its Tier 1 capital ratio. Morgan said it would "pursue initiatives to expand the retail banking services it offers its retail clients and build a stable base of core deposits."
Morgan said it would "pursue initiatives to expand the retail banking services it offers its retail clients and build a stable base of core deposits."
Recall: currently, - $122B non-borrowed funds of the reserve bank system (cumulative since Dec 2007). The FRB is shifting cost of banking to Treasury and revenue generation to debt marketing.
From "Blueprint for a Modernized Regulatory Structure" released 26 March 2008 (graphics by myself); this is the "Short Term Recommendation" which I predicted in a series of April articles would become permanent.
Diversity is the key to economic and political evolution.
DERA ISMAIL KHAN, Pakistan - Pakistani troops and tribesmen opened fire on two U.S. helicopters that crossed into the country from neighboring Afghanistan, intelligence officials said Monday. The helicopters did not return fire and re-entered Afghan airspace without landing, the officials said. Pakistan's army and the U.S. military in Afghanistan said they had no information on the reported incursion late Sunday, which will likely add to tensions between Islamabad and Washington.
The helicopters did not return fire and re-entered Afghan airspace without landing, the officials said.
Pakistan's army and the U.S. military in Afghanistan said they had no information on the reported incursion late Sunday, which will likely add to tensions between Islamabad and Washington.
