EU politicians and financial executives have agreed to inject billions of euros into banks in an effort to stabilize and restore confidence in the world financial system.
The basic plan follows that of Britain', with the governments taking direct equity stakes in distressed banks and guaranteeing bank lending for up to five years. France and Germany are expected to release national packages worth billions of Euros on Monday. Some figures have been bandied about, Germany is considering a plan to inject 50 billion to 100 billion euros into its banks, with a price tag for all of the new measures reaching as much as 400 billion euros, or $536 billion, according to a person briefed on the government’s work.
“The meeting that we had was exceptional,” President Nicolas Sarkozy of France, said at a news conference. “We need concrete measures, we need unity. That’s what we achieved. The plan on which we agreed today will be applied in all our respective states.”
The Belgian finance minister, Didier Reynders, said, “We are committed in all European states to recapitalize banks if we establish a threat to solvency and a risk to the economy....The goal is to kick-start the interbank lending market,” he said.
Additionally unfreezing the commercial paper market used by companies to finance their businesses, is to be an aim of the plan.
Contrary to Britain or the US, a price tag has not been put on the rescue package.
“Our goal is to have coordinated action for the euro zone,” Angela Merkel, the German chancellor, said, and the meeting “is a very important signal for the strength of the euro zone.”
Showing posts with label credit crunch. Show all posts
Showing posts with label credit crunch. Show all posts
Sunday, 12 October 2008
Thursday, 2 October 2008
Wall Street Stil Not Sold on Bailout
Wall Street appears not to believe the $700bn rescue package is going to save the U.S. from recession, even if it does alleviate the credit crunch if the House of Representatives vote for it. The Senate passed it yesterday.
The Dow Jones Industrial Index closed 3.2% or 348 points to close at 10,482. The broader S&P 500 dropped even more with a 46.78 drop or 4% to 1,114. Traditional cyclical sectors, manufacturing, chemical production and mining industries fared worst. These typically are hit hardest by recessions.
The FTSE 100 fell 1.8%
In other news, the European Central Bank left interest rates at 4.25%.
The Dow Jones Industrial Index closed 3.2% or 348 points to close at 10,482. The broader S&P 500 dropped even more with a 46.78 drop or 4% to 1,114. Traditional cyclical sectors, manufacturing, chemical production and mining industries fared worst. These typically are hit hardest by recessions.
The FTSE 100 fell 1.8%
In other news, the European Central Bank left interest rates at 4.25%.
Monday, 29 September 2008
Shock Defeat for Bailout In House of Representatives
House Votes Down $700bn Bailout
The US House of Representatives has voted by 228 to 205 down the $700bn bailout agreed over the weekend. Two-thirds of Republicans and 95 Democrats rejected the deal.
A massive drop in the Dow Jones ensued with a 778 point decline. After the close the percentage was 7.7%. The S&P 500 suffered its biggest percentage drop since Black Monday in 1987.
The FTSE dropped 270 points or 5.3%.
Other Market Moves
Three governments, the Dutch, Belgian and Luxembourg pumped €11bn into Fortis bank. Fortis for its part will have to sell its stake in the ABN Ambro bank.
French bank Dexis has become the latest target of speculators. Dexia handles a lot of the finance for local government. The French government made the now obligatory statement tha the bank would not be allowed to fail.
Wachovia, another bank under attack has been swallowed by Citigroup in a government backed deal..
The UK government is nationalising the Bradford and Bingley bank. Spanish banking giant Santander is to take the savings business and branch network.
The US House of Representatives has voted by 228 to 205 down the $700bn bailout agreed over the weekend. Two-thirds of Republicans and 95 Democrats rejected the deal.
A massive drop in the Dow Jones ensued with a 778 point decline. After the close the percentage was 7.7%. The S&P 500 suffered its biggest percentage drop since Black Monday in 1987.
The FTSE dropped 270 points or 5.3%.
Other Market Moves
Three governments, the Dutch, Belgian and Luxembourg pumped €11bn into Fortis bank. Fortis for its part will have to sell its stake in the ABN Ambro bank.
French bank Dexis has become the latest target of speculators. Dexia handles a lot of the finance for local government. The French government made the now obligatory statement tha the bank would not be allowed to fail.
Wachovia, another bank under attack has been swallowed by Citigroup in a government backed deal..
The UK government is nationalising the Bradford and Bingley bank. Spanish banking giant Santander is to take the savings business and branch network.
Banking Crisis Good For ACM
When asked how the current financial crisis impacted ACM's Business, Managing Director, Nick Bang said: "The current turmoil in the financial, and mostly banking sector, generated huge volatility in the market. Most of our customers consider these moves as more profit opportunities. As a matter of fact ACM traded volume soared consistently in recent weeks."
ACM claims to be a leader in Online Currency Trading and as such is not exposed to any of the risky products which are the focus point of the crisis at the moment.
"Our clients are able to take advantage of the most effective tools and services to successfully handle the foreign exchange market, the volatile conditions give them more opportunities of trading," says Bang.
With a recent rise of its share capital to 20 millions Swiss Francs, ACM is the largest capitalised Swiss online currency broker. "For some banking actors the interdependency of capitals turned to domino's theory disaster." says Bang, "ACM's financing strategy is based on independent capital. We are simply not concerned with this crisis. Moreover, we are working with a wide panel of providers granting us almost endless liquidity," he added.
ACM claims to be a leader in Online Currency Trading and as such is not exposed to any of the risky products which are the focus point of the crisis at the moment.
"Our clients are able to take advantage of the most effective tools and services to successfully handle the foreign exchange market, the volatile conditions give them more opportunities of trading," says Bang.
With a recent rise of its share capital to 20 millions Swiss Francs, ACM is the largest capitalised Swiss online currency broker. "For some banking actors the interdependency of capitals turned to domino's theory disaster." says Bang, "ACM's financing strategy is based on independent capital. We are simply not concerned with this crisis. Moreover, we are working with a wide panel of providers granting us almost endless liquidity," he added.
Sunday, 28 September 2008
$700bn Bailout Deal Hammered Out
A bill is likely to be bought to the House floor on Monday on the proposed $700bn bailout of the financial markets by the US Federal Reserve. Congressional leaders and the Bush administration have reached a tentative agreement.
Staff members from Congress are working through the night to finalize the details and language of the bill. Headline items that have become attached are executive pay limits for executives whose firms seek aid and help to prevent home foreclosures by the government as owner of the distressed mortgage-backed securities.
Firms may have to surrender an equity stake to the government, so the taxpayer can profit if it actually works in the years ahead.
A Congressional panel is to have strict oversight of the deal. Firms hired by the US Treasury are to abide by conflict of interest rules. The White House conceded these restrictions on its requested unfettered authority to run the bailout programme. Democrats for their part removed a demand for judges to be allowed to amend first mortgages. A fee on securities transactions, essentially a tax, to pay for the rescue was also dropped.
“All of this was done in a way to insulate Main Street and everyday Americans from the crisis on Wall Street,” Nancy. Pelosi said at the news conference. “We have to commit it to paper so we can formally agree, but I want to congratulate all of the negotiators for the great work they have done.”
In a statement, Tony Fratto, the deputy White House press secretary, said: “We’re pleased with the progress tonight and appreciate the bipartisan effort to stabilize our financial markets and protect our economy.”
Staff members from Congress are working through the night to finalize the details and language of the bill. Headline items that have become attached are executive pay limits for executives whose firms seek aid and help to prevent home foreclosures by the government as owner of the distressed mortgage-backed securities.
Firms may have to surrender an equity stake to the government, so the taxpayer can profit if it actually works in the years ahead.
A Congressional panel is to have strict oversight of the deal. Firms hired by the US Treasury are to abide by conflict of interest rules. The White House conceded these restrictions on its requested unfettered authority to run the bailout programme. Democrats for their part removed a demand for judges to be allowed to amend first mortgages. A fee on securities transactions, essentially a tax, to pay for the rescue was also dropped.
“All of this was done in a way to insulate Main Street and everyday Americans from the crisis on Wall Street,” Nancy. Pelosi said at the news conference. “We have to commit it to paper so we can formally agree, but I want to congratulate all of the negotiators for the great work they have done.”
In a statement, Tony Fratto, the deputy White House press secretary, said: “We’re pleased with the progress tonight and appreciate the bipartisan effort to stabilize our financial markets and protect our economy.”
Friday, 26 September 2008
Unites View on HSBC Job Cuts
"We are now seeing the human cost of the credit crunch. We need action to end this crisis. This situation should never happen again and that's why the financial services need to be regulated more effectively. We welcome Gordon Brown's efforts to secure an international regulatory regime. This is a global crisis and it requires an international solution." Derek Simpson on the 500 jobs cut at HSBC's Investment Banking division.http://www.blogger.com/post-create.g?blogID=1300286647260194939#
Thursday, 25 September 2008
Former FDIC Chairmans Worthy Opinion on Credit Crunch
As the U.S. faces major reform of its financial industry, the question on the minds of many consumers is "how will this affect me?" It's also a question that is very commonly on the minds of most board members who are seeing unprecedented drops in their company's stock value in the financial markets. TK Kerstetter, president & CEO of Board Member Inc., which publishes Corporate Board Member magazine and its sister publication, Bank Director magazine, sat down with former FDIC chairman, L. William Seidman to discuss the current market crisis and how it will affect the entire banking industry. Corporate Board Member's web editor, Laura Finn, also interviewed James C. Woolery, partner with Cravath, Swaine & Moore LLP, to discuss what in his opinion caused the crisis, the impact of the government bailouts, bankruptcies and mergers on the board and its global ramifications.
According to Seidman, who states that as much as one year ago he warned about the dangers of Fannie Mae and Freddie Mac and the risk of a "major disaster," the nation has for a long time been running at a weakened state where credit is concerned. He said the biggest question now that has not yet been addressed is "what do we do about changing the system so it doesn't happen again?" Seidman also states that since the U.S. is part of a global financial system, the Wall Street crisis directly affects the financial institutions of the developed countries around the world.
Woolery believes liquidity issues and a failure of financing in the housing industry ultimately caused the financial crisis and that the recent Lehman Brothers' bankruptcy played a major role in the breakdown in the financial industry. He also warns that one of the side effects from the crisis will be that funds will be less available for borrowers which will affect the general economy and corporate strategy since the banking industry will not have extra funds to help support new businesses. According to Woolery, one lesson that boards should learn from this experience is that they need to push management teams to address risk head on instead of hoping and waiting until things get better. If they decide not to take action, they should be well informed, as it is their job to push management to make the type of difficult decisions that are in the best interest of the company.
"One of the benefits of our websites and online communications are their ability to respond immediately to critical issues affecting board members between both Corporate Board Member and Bank Director," said Kerstetter. "Our interview with Bill Seidman, who is arguably one of the most knowledgeable experts in the banking and financial markets, will help boards and management react immediately to issues that affect their companies."
According to Seidman, who states that as much as one year ago he warned about the dangers of Fannie Mae and Freddie Mac and the risk of a "major disaster," the nation has for a long time been running at a weakened state where credit is concerned. He said the biggest question now that has not yet been addressed is "what do we do about changing the system so it doesn't happen again?" Seidman also states that since the U.S. is part of a global financial system, the Wall Street crisis directly affects the financial institutions of the developed countries around the world.
Woolery believes liquidity issues and a failure of financing in the housing industry ultimately caused the financial crisis and that the recent Lehman Brothers' bankruptcy played a major role in the breakdown in the financial industry. He also warns that one of the side effects from the crisis will be that funds will be less available for borrowers which will affect the general economy and corporate strategy since the banking industry will not have extra funds to help support new businesses. According to Woolery, one lesson that boards should learn from this experience is that they need to push management teams to address risk head on instead of hoping and waiting until things get better. If they decide not to take action, they should be well informed, as it is their job to push management to make the type of difficult decisions that are in the best interest of the company.
"One of the benefits of our websites and online communications are their ability to respond immediately to critical issues affecting board members between both Corporate Board Member and Bank Director," said Kerstetter. "Our interview with Bill Seidman, who is arguably one of the most knowledgeable experts in the banking and financial markets, will help boards and management react immediately to issues that affect their companies."
Thursday, 18 September 2008
Money Market Funds Bolstered
The $3,400bn money market funds which have been one of the latest targets of the credit crunch have been bolstered by two aggressive steps by the US government.
Up to $50bn of losses would be guaranteed by the US Treasury at least temporarily. “For the next year, the U.S. Treasury will insure the holdings of any publicly offered eligible money market mutual fund — both retail and institutional — that pays a fee to participate in the program,” the Treasury said in a statement.
Separately the Federal Reserve, would expand its emergency lending program to help commercial banks finance the purchase of asset-backed securities from the funds.
A massive $170bn has been withdrawn in the last week. A number of funds have "broken the buck" or fallen below the standard net asset value of $! a share.
“This action should enhance market confidence and alleviate investors’ concerns about the ability for money market mutual funds to absorb a loss,” the Treasury statement said. “Investors in money market mutual funds with a net asset value that falls below $1 would be notified that their fund triggered the insurance program.”M
Up to $50bn of losses would be guaranteed by the US Treasury at least temporarily. “For the next year, the U.S. Treasury will insure the holdings of any publicly offered eligible money market mutual fund — both retail and institutional — that pays a fee to participate in the program,” the Treasury said in a statement.
Separately the Federal Reserve, would expand its emergency lending program to help commercial banks finance the purchase of asset-backed securities from the funds.
A massive $170bn has been withdrawn in the last week. A number of funds have "broken the buck" or fallen below the standard net asset value of $! a share.
“This action should enhance market confidence and alleviate investors’ concerns about the ability for money market mutual funds to absorb a loss,” the Treasury statement said. “Investors in money market mutual funds with a net asset value that falls below $1 would be notified that their fund triggered the insurance program.”M
Wednesday, 17 September 2008
Wachovia and Morgan Stanley?
The New York Times is suggesting a merger between US Investment bank Morgan Stanley and Wachovia.
Such a deal would leave Goldman Sachs as the sole remaining independent investment bank on Wall Street. Two other bulge bracket banks, Bear Stearns and Lehman Brothers have gone to the wall. A third, Merrill Lynch, has gone the route of joining their retail bank brethren Bank of America.
Such a deal would leave Goldman Sachs as the sole remaining independent investment bank on Wall Street. Two other bulge bracket banks, Bear Stearns and Lehman Brothers have gone to the wall. A third, Merrill Lynch, has gone the route of joining their retail bank brethren Bank of America.
CME Statement on AIG
"CME Group took an emergency action today to facilitate the reduction of the positions of American International Group, Inc. (AIG) and its subsidiaries and to protect the orderly functioning of the market. The agreed-upon order permits the limited execution of block trades by AIG in certain CME and CBOT commodity futures products, including Soybeans, Soybean Oil, Corn, Wheat, Live Cattle and Lean Hogs, for the purpose of liquidating a portion of AIG's open positions. A block trade is a privately negotiated transaction between eligible contract participants that is executed outside of the public auction market. The order is effective through Wednesday, September 17, 2008."
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