Financial havoc wallops US dollar and stocks

[Dover]

Source: Reuters,

* Investors flee for safety after Lehman buyout talks fail
* High-grade debt, gold, yen in demand on bank industry storm
* Focus turns to Fed policy decision on Tuesday
By Kevin Plumberg

HONG KONG, Sept 15 (Reuters) - The U.S. dollar tumbled and Treasury debt and gold prices jumped on Monday after talks to sell Lehman Brothers faltered, leading to grave uncertainties about other banks and shaken confidence in the financial system.

Stock markets in Australia, Singapore and Taiwan dropped between 1 to 2 percent as investors excised any trace of risk in their portfolios, loading up on investment-grade debt as consolidation in the financial sector sent shockwaves through almost all asset classes.

After a tumultuous weekend in which Britain's Barclays Plc pulled out of the bidding for Lehman, putting the bank on a path to bankruptcy, an extraordinary Sunday trading session in the $455 trillion derivatives market opened in the United States so dealers could limit the damage from the fallen giant.
Most major Asian equity markets were closed for public holidays but whatever traders that were around followed a simple dictum: seek safety first and ask questions later.

The Swiss franc and yen, currencies associated with stability in times of duress, strengthened, especially against the dollar, which reeled as some in the market speculated the Federal Reserve may have to cut interest rates on Tuesday when it meets to shore up the economy from financial fallout.
Investors may have to adjust their views on the financial sector since the U.S. government refused to back a Lehman deal the way that it did with JPMorgan Chase's purchase of Bear Stearns six months ago. Events seemed to show the private sector will have to sort itself out.
Bank of America is in advanced talks to acquire Merrill Lynch & Co Inc, people briefed on the matter told Reuters...>

Read more: http://www.guardian.co.uk/business/feedarticle/7797898

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Global Banks Prepare For Lehman Bankruptcy

FN ARENA NEWS - 15/09/2008


The latest news on the Lehman Bros front is that a consortium of US and foreign banks is preparing an emergency pool aimed at providing funding for those institutions about to experience fallout from Lehman's demise. In so doing, the banks are assuming the worst.

Talks broke down on the weekend between the US Treasury and at least two global banks - Bank of America and Barclays - on a Lehman rescue plan. Neither bank was prepared to commit funds to the purchase of Lehman assets without a guarantee of protection against losses from the government or Fed, a la Bear Stearns.

The problem global banks face is that all have their own balance sheet difficulties, so while picking up Lehman at a fire sale rate might be enticing there still is a likelihood more write-downs in the value of those assets would transpire, making a difficult situation even worse. On the flipside however, so interwoven are credit derivative deals amongst the global banking fraternity that a failure of Lehman would have ramifications for all.

Thus it's not just as simple as letting a competitor go to God.

The consortium of unnamed banks are planning to put up a US$50bn pool, Associated Press reports, aimed at providing funding for those banks who may need it in the fallout, and thus "inoculating" the global financial system, at least to some extent.

In the meantime, the US Treasury and Fed are said to be prepared to expand their own emergency facility to US commercial and investment banks, otherwise known as the "discount window". The Fed opened up its discount window to investment banks when Bear Stearns went under. The fact the window has been open ever since - and underutilised by the investment banking fraternity - is one reason the government sees no reason why it should put up loans to help bail out Lehman...>

http://www.sharecafe.com.au/fnarena_news.asp?a=AV&ai=10173

------------------------------------------------------------


All of this might make more sense if we understand the bigger plan of bank consolidation as just another step toward globalization of financial institutions:

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=114x42954

[depakid]

1. Impressive howsome writers love their adjectives

yet at the same time seem innumerate when it comes to proportionality.

[Orrex]

10. No doubt, but....

To what are you referring, specifically?

[depakid]

35. The dollar isn't getting "walloped"

:eyes:

Now, if the Fed cuts rates tomorrow... then maybe there'll be whoppin.

[fasttense]

2. The economy is just getting worse and worse

while the idiot bushes keep bailing water, the boat keeps sinking. Maybe the bushes should patch the huge hole in the side of the boat?

They have no understanding of the economy. They think by bailing out one or two big corporations all will be fine. But the truth is, someone has to buy the crap the corporations are spewing and there seems to be no fools left (except the bush government).

[rfranklin]

16. Actually they know well what they are doing...

This is a replay of the S&L "crisis" which looted the savings of average Americans to enrich the Bush family and their cronies. They stole the money through loans that they never repaid, gigantic compensation packages for CEOs and board directors. The government had to bail out the banks for billions. Then the Bush family bought up prime properties for pennies on the dollar through the government foreclosure agency. This is the same only on a much bigger scale. The green light was provided by the banking "modernization" bill promoted by Phil Gramm (MCCain's kithcen cabinet economic advisor) who also enabled Enron to fleece California and stockholders.

[Rosa Luxemburg]

25. Perhaps the voters should be informed of this?

[dixiegrrrrl]

41. Bloomberg tv just tried to do that and got cut off

the announcer and the guest were starting to talk about the absurdity of Bush coming out to say everything was fine, and the 2nd time the name Bush was spoken, station went to commercial in mid-sentence.
They were talking some real stuff, then blooey.
Back from commercial, guest is gone, film clip came on in progress.

[libodem]

28. You have put it very clearly

this is exactly what is happening. They NeoCons are looting the rest of the country, since they have already taken all of the National treasury and run it into debt, no they are on to the private sector, as a last big grab before they leave office. Anarchy for the rich. They are above our laws and no one will try and prosecute them for all this either. This is the coup de gras of the Project for the New American Century. Now they will all leave government and torment us through the private sector, again. I don't know how we have let these unscrupulous thieves profit from holding public office, I thought there were laws against this kind of thing.

[Karenina]

3. Will also rec your thread in ECON. Thanx!

:hi:

[formercia]

4. Sunday trading to limit the damage

at the expense of another.

Meanwhile, Joe nickel and dime trader has to wait until Monday Morning to unload at a loss.

The oligarchs always have the advantage.

[happygoluckytoyou]

5. "Whiners.... the economy is doing JUST FINE.... heck of a job" Bush/McCain

[whistle]

15. ...and the economy consists of primarily trading, service and gambling

...production simply no longer exists except for military/industrial goods...work hard, be happy.

[lenegal]

6. Privatize profits, socialize losses

Is this the good ole American way for the douche bag companies going under?

And we are stuck with the debt.

Enough, enough.

[debbierlus]

8. It should be an Obama talking point

[Hayduke Lives]

7. Banks aren't the only ones looking for bailouts now

I just heard on NPR that the US auto industry is looking for a $50B bailout loan from the Fed. They're couching it as "investment to speed up the mfg. of hybrids".

Funny how they always had capital to fund development of high margin SUVs but they can't seem to figure out how to build a battery...

http://www.npr.org/templates/story/story.php?storyId=94617094

Apparently BO and McCain both back the plan. (Gosh, is MI a swing state or something?) I sympathize with the auto workers, but I'm so freaking fed up with Detroit's greed, mismanagement and utter lack of vision.

[happygoluckytoyou]

9. DIDNT ONE OF THE MCCAINS JUST LEAVE BANKING to spend "more time with his family" LOL

[Odin2005]

13. John's son Andrew.

The bank went belly-up...

[wizstars]

11. First it was Bear Stearns, then FannieMae....

...& FreddieMac, now Lehman & Merrill Lynch. How can anybody vote repuglican this year (or ever again)?? It's beyond me.

[SammyWinstonJack]

24. Oh but they will, in droves.

x(

[MsLeopard]

32. And even if they don't

electronic voting machines will make it look like they are. We are so screwn.

[xchrom]

12. recommend

[Jackpine Radical]

14. Must be another one of those psychological recession thingies.

C'mon, bankers, suck it up. Phil Gramm says you're all a buncha whining weenies.

[liberalhistorian]

26. No, he said WE, the average

Joe and Jane Schmo, are whiners, not the bigwig financial fatcats. Of course, whenever they whine, they always have a good reason for it, whereas the rest of us are supposed to suck it up and go starve under a bridge or something.

[Jackpine Radical]

33. Oh, thank you so much for clarifying that.

I was so confused, but I see it now. They have so much more to lose, after all, so it wouldn't be whining for them.

[SOS]

17. The glorious result of 30 years of deregulation

"The markets know best! Get government regulators off our Wall Street backs!"

And today we see the result.
Collapse.

Oh well, at least the CEO of Lehman will get his $63 million severance package,
Maybe he will buy a new mansion in the Hamptons at a good price.

[liberalhistorian]

27. They say that until they're in trouble. Then they

all go running to Uncle Sam with their hands out for the goodies, which Uncle Sam happily takes from us to shore up their greedy mismanagement. If they truly followed their philosophy of allowing the market to work in all things and letting the market decide, they wouldn't demand gazillions from the very federal government they so snidely deride. They would allow the troubled institutions to collapse the way they would under the market. But they're not going to do that because they don't really fully believe in that philosophy. They believe in the "privatize the profit and socialize the risk/loss" philosophy. Fucking hypocrites that are bringing the rest of us all down with them.

[bobd0]

18. Another Bush, another banking crisis

Does anyone sense a theme here? Republican economic policies have brought us to this point during the past FIVE Republican administrations of Reagan/Bush/Bush. We're still paying for George H.W. Bush's savings and loan debacle which ultimately cost the U.S. taxpayer somewhere in the neighborhood of $125 BILLION. It took a Democrat to reverse the economic destruction of the Reagan/Bush years yet the Republican Party has somehow managed to define Clinton negatively while "W" and his disastrous economic policies are rarely mentioned in the MSM as the cause of the current Bush banking crisis and associated scandals.

THIS IS WHAT REPUBLICAN ECONOMICS, AND THE BUSH FAMILY IN PARTICULAR, DOES AND THIS IS WHAT MCCAIN AND PALIN WILL CONTINUE TO DO.

How the hell Obama and McCain are even in the polls is beyond me. This year of all years should be an epic landslide for Democrats at all levels of government yet the same dirty tactics that ushered in eight disastrous years of George W. Bush appear to be working again. How stupid do people have to be to fall for the same tricks THREE TIMES even as the results of those tactics play out right in front of their eyes?

It's hard to believe, and painful to admit, but Americans appear to be exactly as stupid as needed.

[JohnWxy]

20. Obama needs to bring this up in his speeches. Republicans always selling deregulation like it will

help the economy cuzz it will cut out all those costs of Government oversight. How much is it costing to have the whole financial system colapse????

[EnviroBat]

19. Yep, in just about a year from now, the fucking Chinese

are going to own your house. Feels good doesn't it? Well, my electricity is out, and my basement might flood. The Chinese can have the place.

[atjrpsych]

21. Time for us to focus back real problems

There has been so much diversion with Palin, that it seems that many American's forgot what this upcoming race is about. Only a crisis, can bring our attention back to the tremendous problems this country is facing, partially as a result of some the current administrations policies (or should I say lack of policy).

[busymom]

22. Am I the only one sort of happy about this?

I know it sounds terrible...and we have investments in retirement that are losing money...but...my dad (a republican to the core) pushed the privatize social security memo and argued vehemently with me that the economy was doing great and the democrats were making this all up, etc.

He is totally opposed to any kind of welfare or social services and I love pointing out to him that the bailout of these companies is just a form of welfare for businesses. It makes him squirm when I talk about letting the free market speak.

"If we don't bail out these businesses, America will be ruined."

"Well, dad, I guess these companies will have to pull themselves up by their bootstraps and then so will we as a nation. "

[liberalhistorian]

29. I understand what you're saying and on one level I

agree with you. It just drives me batty-nuts when people talk like your father, and refuse to recognize that continually bailing out these companies courtesy of the taxpayers is not only NOT following their so-ballyhooed "let the markets work and decide" philosophy, but is nothing more than the worst form of corporate welfare. And I have absolutely zippo sympathy for the bigwig fatcats that have brought this all down on themselves.

The problem is, however, that the bigwigs aren't really the ones who'll be paying for this and suffering for it. WE are. As well as the thousands of employees now being severed from their economic lifeline. If it wouldn't cause such a horrendous ruin for the rest of us and the country, I'd be the first to say fuck 'em, let the bastards freeze in the dark.

[happygoluckytoyou]

31. ON A DIFFERENT LEVEL.......

poor people have no stocks (other than the occasional pension)..... same with the housing market.....
i cannot tell you how happy it makes me to see the "gee i thought i was a rethuglican" not-really-rich guys see their hard-stolen money go valueless

when the GOP started their "WAR ON THE MIDDLE CLASS" most of those in the "one-step-better" group thought they were exempt... HAHA

THE WEALTHY have pillaged the middle.... there IS NO POINT GOING AFTER THE POOR.... so now they are hitting the "slightly rich"....
AIN'T THAT A SHAME....

similar to bringing in the CHEAP LABOR FIELD WORKERS....... then THE UNION BUSTING blue collar...... then the OUTSOURCING white collar......
now the BANKING fancy white collar......

sorry FOOLS.... you are just the next link on their chain...........

[liberalhistorian]

34. Yes, very true. But remember that a lot of us

average Joes and Janes also have a stake in the stock market, not just the wannabes and the fatcats. And a lot of pensions and retirements are heavily invested in the stock market as well, including my parents' retirements. And they are true-blue liberal retired teachers who've worked very hard all of their lives.

[Union Thug]

30. I can relate to this. For me, it's another nail in the coffin of the greed is good zombies. n/t

[RedLetterRev]

23. K/R

Even Ray Charles could have seen this coming. The (R) folks around me are in shock, wondering how their portfolios could have crapped so badly. They were plenty snide when the market was puffed full of nothing but hot air around 14,000ish. A few years ago, my warnings were dismissed as "lefty loonie nonsense". Now I'm about as well-insulated as a walking-around person can get, but at this point "I told you so" still doesn't feel very nice at all, even looking at their shocked, long faces.

[llmart]

36. Yeah, but you have to admit.......

it sure feels good sometimes to smugly walk by them and say something like, "Well, I guess I'm not so dumb after all when it comes to economic issues." Why not? We've had to listen to their bullshit for 8 years now; even more.

[RedLetterRev]

37. Especially when I've had to hear what a lefty-loony hillbilly hick

I am and what accomplished "finacicial geni-i" they are. Mm-hm. I'm just smiling like Mona Lisa as they're wailing at the sizeable bleeding chunks being wrested from their arses. Aside from my home mortgage (which I got through VA at a very, very low rate), I owe nothing. Even if I lost my full-time job, I can carry that on proceeds from Rev-work (people will still marry, have babies and need to be planted) and produce from my little farm (folks still need to eat and will barter food for goods). I can grow my own fuel for tilling and have been using green methods (zero cost for fertilizer and insecticides). When my pubbie cohorts sneer at lefty-loonie green methods, I state my ROI over the last 2 years, mention the walking-around cash I have (and they don't), and throw the final zinger that makes them shit: "It's good, solid, conservative economics. I'm retaining profit and zeroing loss. And how well have YOU done this year? Hmmmm?" Funny, I don't get an answer, other than a suddenly-I'm-terribly-busy scowl.

Heh.

Mine is not a perfect system, but it's as survivable across a near-zero-money system as any can get. I've leveraged the best skills I've got at hand, which admittedly aren't many. There isn't a great call for small-scale farmers or creative writers who happen to be ordained ministers. Again, I'm just very fortunate to be able to coax things reliably from the earth and there will always be a need for people to be married, planted or named at birth. One finds one's vertical; I'm in mine.

But I've managed to irk shit out of my pubbie cohorts, though, me bein' an ignernt hick and all. Yeah, it does feel good. Damn good, actually.

As I said before, Ray Charles could have seen this trainwreck coming; ever-more out-of-control freep-marketing at its finest. At this point, I'm about as well-insulated as a walking-around person could get. Even if the lights went out, I'm in a fortunate enough position such that I could eat and stay warm in the winters. My cohorts? Meh, not so much.

I'm not yet convinced we'll see a return of Hoovervilles and Hoover Blankets, but we may not be much better off. Since the advent of hate-radio with its deep and abiding polarization and poisoning of so many minds, the reckoning and reconciliation (if one can be reached after so much damage) will be vicious enough.

[llmart]

39. Well, I see by your profile......

that you live in NC. I used to live in Matthews. Now I understand your references to redneck:)
Boy, when I lived in NC I took a lot of heat at work for supporting Harvey Gantt vs. Jesse Helms.

I, too, owe absolutely nothing. House is paid for (I never bought into that BS that it's not a good idea to pay off your mortgage), cars paid for, don't use credit cards unless purchasing on the Internet which is rare. We've always lived off one income even when we had two.

I remember in NC my boss was from an old money family in Charlotte. When the market crashed in 1989 I thought he would have a nervous breakdown that day. He never talked much about personal stuff to me but he came in my office that day and said, "Sometimes I envy people like you who don't seem to need much to make you happy." He knew I had grown up poor and even though I was comfortable I still didn't care for things.

I can live with very little. That's the secret.

[RedLetterRev]

44. " I can live with very little. That's the secret."

Exactly so! I left NC at 18 and traveled the US and a good piece of the world for much of nearly 30 years before returning. I got lucky enough to find a foreclosure in wonderful shape on almost 9 acres of land so far out in the country you have to pipe in daylight. There was a time in my life I couldn't wait to get out of the holler. Now I'm happy on my little "heaven on the hill". It ain't any great big thing, but it's every little thing to me. I've got enough land to work to be productive, three good dogs and the love of my life. We've got skills we learned growing up hard; we grow a lot of what we eat; we can, preserve and put up; we're reasonably mechanically inclined; not strangers to hard work and still young enough to do it. My only regret is that the house isn't yet paid off, but if that's the worst I've got to carry, I think I've got it licked. I know a lot of people (up-close and personal) in a helluva mess, far worse off than I am. I'm right blessed, all things considered.

[OHDEM]

38. CNN Breaking News...

The Dow ends nearly 500 points lower -- its worst point drop in more than seven years -- as bank woes scare investors.

[llmart]

40. Except for that asshat Wolf Blitzer.....

is trying to say that "even homeowners are to blame." Yeah, you keep trying to put that meme out there you idiot that way the big guys don't have to take responsibility.

[OHDEM]

42. Listen...I was in the mortgage industry for 6+ years.

There is a reason that they call it "predatory" lending. I worked on the title insurance end so I saw lots of mortgage brokers, mostly non-conforming meaning the borrowers had less than great credit. They would turn these people over every 2 years charging them a whole new set of fees & having their home value falsely raised with shady appraisers that got kickbacks. That whole business became a scam because the bubble grew really fast & the regulators took too long to catch on.

Now, they want to blame the homeowners who were often good people that TRUSTED the snake in the grass mortgage brokers. They weren't all bad, but most were draining the equity (false equity) from everyone's homes. They made tons of money & so did the lenders that wrote risky loans & the underwriters that allowed them.

[superconnected]

43. On the day Mccain announces the economy is fine. This is now the top story.