Eeyore's News and View

Better be a wise shopper now-a-days. Always keep your eyes opened for a deal. They are getting harder and harder to find. That means you have less and less money to spend, when you find one. Keep your eyes open.

Prep talk today is back to money. Debt is a killer, it becomes your master, it tells you when to get up when to work when you can get off. Don't get me wrong i think it is a good thing to work in fact that is what God has told us to do since our ancestors fell in the garden. He told to work by the sweat of our brow, Paul says in the New Testament that if a man does not work he should not eat. I guess Paul could not be a politician today. I think it would make him puke if he saw what was happening to this great nation. Today i found an article about teaching your kids. I got a couple and was thinking about this the other day, It is time for me to quite showing them but actually talk about it with them.
Teens' Guide for Money Management September 23, 2008 - 12:28am
Does your teenager know how to manage money? It takes time and effort to learn good money management techniques. The Federal Deposit Insurance Corporation has produced a guide to help your teenager develop the skills to make wise choices.
Your teen may be amazed to learn that saving a small amount of money can grow into a sizeable sum over a period of years. For example, if he or she saves $50 a month and puts it in an account that earns 3.5 percent, it will grow to $3,300 after five years.
The guide talks about everything from shopping for a bank account to taking precaution against identity thieves. It even encourages teens to become involved in helping others through gifts of time or money.
Start Smart: Money Management for Teens How to save, spend and protect your cash
Introduction
Saving Money
Simple, Everyday Things You Can Do to Save Money
It's Amazing: How a Small Savings Account Can Get Big Over Time
Where to Keep Your Money
Shopping for a Bank Account That Fits Your Style
Are You Ready to Start Investing? Understand the Risks and the Rewards
Savings Bonds: A Safe and Affordable Investment Option
Spending Money
5 Ways to Cut Spending...and Still Get to Do and Buy Cool Things
Do You Really Need Those $125 Designer Sneakers?
Borrowing Money
Getting a Loan: A Responsibility to Be Taken Seriously
Small Payments Can Mean Big Costs When Borrowing
Protecting Against Fraud
Warning: Identity Thieves Target Young People, Too
Banking Basics
The FDIC—Who We Are and Why You Should Know About Us
What Do Banks Do?
Extra Points
Another Good Use of Your Money: Helping the Less Fortunate
Gift Cards Are Great But Beware of Risks and Costs
Getting a Job: A Way to Earn and Learn at the Same Time
How to Learn More
Sources of Help and Information About Money Matters for Teens and Families
A Final Exam: Test Your Money Management IQ

http://www.fdic.gov/consumers/consumer/news/cnsum06/


It is strange what you remember and don't at times. Years ago G. Gordon Liddy had a radio program on the DC airwaves. One day i heard try to explain to his listeners about how they could understand how much a million was and how much a billion was. He would call it a thousand million.
Thomas Sowell breaks it down:

Many people have trouble even forming some notion of what such numbers as billion and trillion mean. One way to get some idea of the magnitude of a trillion is to ask: How long ago was a trillion seconds?

A trillion seconds ago, no one on this planet could read and write. Neither the Roman Empire nor the ancient Chinese dynasties had yet come into existence. None of the founders of the world's great religions today had yet been born.

That's what a trillion means. Put a dollar sign in front of it and that's what the current bailout may cost.

MP: One trillion seconds equals 16.667 billion minutes, 277.7 million hours, 11.574 million days, and 31,710 years.
http://mjperry.blogspot.com/2008/09/how-big-is-one-trillion-1000000000000.html

A Political "Solution" by Thomas Sowell

Who was it who said, "crack-brained meddling by the authorities" can "aggravate an existing crisis"? Ronald Reagan? Milton Friedman? Adam Smith? Not even close. It was Karl Marx. Unlike most leftists today, Marx studied economics.

Is the current financial crisis going to lead to crack-brained meddling or to some rational actions? Predicting what politicians are going to do is risky business. We will have to wait and see.

Saints are no more common on Capitol Hill than they are on Wall Street. We can only hope that the political "solution" does not turn out to be worse than the problem.

There are times when government intervention can make things better. But that is no guarantee that it won't make things worse. As they say, "the devil is in the details"-- and we don't know the details yet.

Probably most members of Congress don't know the details yet-- and many may still not know the details when the time comes for them to vote on this bailout.

Taking an optimistic view, this biggest bailout of all time may stop the problems in financial markets from spreading into the general economy-- which is currently nothing like the disaster area that the media portray it to be.

Ninety percent of the people on this planet would exchange their economic situation for ours in a minute. The media love hype, and have been dying to use the word "recession" all year but nothing has happened that meets the definition of a recession.

The American economy is growing, not declining. Our unemployment rate is up to 6 percent but there are countries that would be delighted to get their unemployment rate down to 6 percent. Our inflation rate is up a little but many countries would love to get their inflation rate down to where ours is.

Why then is there such a mess in the financial markets? Much of that mess is due to the very people we are now turning to for solutions-- members of Congress.

Past Congresses created the hybrid financial institutions known as Fannie Mae and Freddie Mac, private institutions with government backing and political influence. About half of the mortgages in this country are backed by these two institutions.

Such institutions-- exempt from laws that apply to other financial institutions and backed by the implicit promise of government support with the taxpayers' money-- are an open invitation to risky behavior. When these risks blew up in their faces, Fannie Mae and Freddie Mac were taken over by the government, costing the taxpayers billions of dollars.

For years the Wall Street Journal has been warning that Fannie Mae and Freddie Mac were taking reckless chances but liberal Democrats especially have pooh-poohed the dangers.

Back in 2002, the Wall Street Journal said: "The time for the political system to focus on Fannie and Fred isn't when we have a housing crisis; by then it will be too late." The hybrid public-and-private nature of these financial giants amounts to "privatizing profit and socializing risk," since taxpayers get stuck with the tab when high-risk finances don't work out.

Similar concerns were expressed in 2003 by N. Gregory Mankiw, then Chairman of the Council of Economic Advisers to President Bush. But liberal Democratic Congressman Barney Frank criticized Professor Mankiw, citing "concern for housing" as his reason for supporting Fannie Mae. Barney Frank said that fears about the riskiness of Fannie Mae were "overblown."

Maxine Waters and other members of the Congressional Black Caucus have also been among the liberal Democrats defending Fannie Mae. Just last year, Senator Charles Schumer advocated legislation to allow Fannie Mae and Freddie Mac to increase their already huge role in the mortgage market. Republican Congressman Mike Oxley has also defended these hybrid financial giants.

Both Fannie Mae and Freddie Mac have been generous in their contributions to politicians' political campaigns, so it is perhaps not surprising that politicians have been generous to them.

This is certainly part of "the mess in Washington" that Barack Obama talks about. But don't expect him to clean it up. Franklin Raines, who made mega-millions for himself while mismanaging Fannie Mae into a financial disaster, is one of Obama's advisers.

http://townhall.com/columnists/ThomasSowell/2008/09/23/a_political_solution

A Political "Solution": Part II by Thomas Sowell

Estimates of how much money a government program will cost are notoriously unreliable. Estimates of the cost of the current bailout in the financial markets run into the hundreds of billions of dollars, and some say it may reach or exceed a trillion.

Many people have trouble even forming some notion of what such numbers as billion and trillion mean. One way to get some idea of the magnitude of a trillion is to ask: How long ago was a trillion seconds?

A trillion seconds ago, no one on this planet could read and write. Neither the Roman Empire nor the ancient Chinese dynasties had yet come into existence. None of the founders of the world's great religions today had yet been born.

That's what a trillion means. Put a dollar sign in front of it and that's what the current bailout may cost.

Will that money be spent wisely? It is theoretically possible. But don't bet the rent money on it or you could end up among the homeless.

Whenever there is a lot of the taxpayers' money around, politicians are going to find ways to spend it that will increase their chances of getting re-elected by giving goodies to voters.

The longer it takes Congress to pass the bailout bill, the more of those goodies are going to find their way into the legislation. Speed is important, not just to protect the financial markets but to protect the taxpayers from having more of their hard-earned money squandered by politicians.

Regardless of what Barack Obama or John McCain may say they are going to do as president, after a trillion dollars has been taken off the top there is going to be a lot less left in the federal treasury for them to do anything with.

Already Senator Christopher Dodd is talking about extending the bailout from the financial firms to homeowners facing mortgage foreclosures-- as if the point of all this is to play Santa Claus.

The huge federal debts that we already have are the ghosts of Christmas past.

Financial institutions are not being bailed out as a favor to them or their stockholders. In fact, stockholders have come out worse off after some bailouts.

The real point is to avoid a major contraction of credit that could cause major downturns in output and employment, ruining millions of people, far beyond the financial institutions involved. If it was just a question of the financial institutions themselves, they could be left to sink or swim. But it is not.

We do not need a replay of the Great Depression of the 1930s, when the failure of thousands of banks meant a drastic reduction of credit-- and therefore a drastic reduction of the demand needed to keep production going and millions of people employed.

But bailing out people who made ill-advised mortgages makes no more sense that bailing out people who lost their life savings in Las Vegas casinos. It makes political sense only to people like Senator Dodd, who are among the reasons for the financial mess in the first place.

People usually stop making ill-advised decisions when they are forced to face the consequences of those decisions, not when politicians come to their rescue and make the taxpayers pay for decisions that the taxpayers had nothing to do with.

The Wall Street Journal, which has for years been sounding the alarm about the riskiness of Fannie Mae and Freddie Mac, recently cited Senator Christopher Dodd along with Senator Charles Schumer and Congressman Barney Frank among those on Capitol Hill who have been "shilling" for these financial institutions, downplaying the risks and opposing attempts to restrict their free-wheeling role in the mortgage market.

As recently as July of this year, Senator Dodd declared Fannie Mae and Freddie "fundamentally strong" and said there is no need for "panicking" about them. But now that the chickens have come home to roost, Senator Dodd wants to be sure to get some goodies from the rescue legislation to pass out to people likely to vote for him.

Don't make any bets on how this situation is going to turn out-- except that we can predict that politicians will blame the "greed" of other people. You can bet the rent money on that.

http://townhall.com/columnists/ThomasSowell/2008/09/24/a_political_solution_part_ii


WaMu becomes biggest bank to fail in US history September 26, 2008 - 8:56am
Washington Mutual customer Kyle Davidson talks on his cell phone as he withdraws some money from the ATM at a Washington Mutual branch at the WaMu Center in Seattle Thursday Sept. 25, 2008. JPMorgan Chase & Co. Inc. came to the rescue of ailing Washington Mutual Inc. Thursday, buying the ailing thrift's banking assets after WaMu was seized by the Federal Deposit Insurance Corp. (AP Photo/Stephen Brashear)
By MADLEN READ AP Business Writer
NEW YORK (AP) - As the debate over a $700 billion bank bailout rages on in Washington, one of the nation's largest banks _ Washington Mutual Inc. _ has collapsed under the weight of its enormous bad bets on the mortgage market.
The Federal Deposit Insurance Corp. seized WaMu on Thursday, and then sold the thrift's banking assets to JPMorgan Chase & Co. for $1.9 billion.
Seattle-based WaMu, which was founded in 1889, is the largest bank to fail by far in the country's history. Its $307 billion in assets eclipse the $40 billion of Continental Illinois National Bank, which failed in 1984, and the $32 billion of IndyMac, which the government seized in July.
One positive is that the sale of WaMu's assets to JPMorgan Chase prevents the thrift's collapse from depleting the FDIC's insurance fund. But that detail is likely to give only marginal solace to Americans facing tighter lending and watching their stock portfolios plunge in the wake of the nation's most momentous financial crisis since the Great Depression.
Because of WaMu's souring mortgages and other risky debt, JPMorgan plans to write down WaMu's loan portfolio by about $31 billion _ a figure that could change if the government goes through with its bailout plan and JPMorgan decides to take advantage of it.
"We're in favor of what the government is doing, but we're not relying on what the government is doing. We would've done it anyway," JPMorgan's Chief Executive Jamie Dimon said in a conference call Thursday night, referring to the acquisition. Dimon said he does not know if JPMorgan will take advantage of the bailout.
WaMu is JPMorgan Chase's second acquisition this year of a major financial institution hobbled by losing bets on mortgages. In March, JPMorgan bought the investment bank Bear Stearns Cos. for about $1.4 billion, plus another $900 million in stock ahead of the deal to secure it.
JPMorgan Chase is now the second-largest bank in the United States after Bank of America Corp., which recently bought Merrill Lynch in a flurry of events that included Lehman Brothers Holdings Inc. going bankrupt and American International Group Inc., the world's largest insurer, getting taken over by the government.
JPMorgan also said Thursday it plans to sell $8 billion in common stock to raise capital.
The downfall of WaMu has been widely anticipated for some time because of the company's heavy mortgage-related losses. As investors grew nervous about the bank's health, its stock price plummeted 95 percent from a 52-week high of $36.47 to its close of $1.69 Thursday. On Wednesday, it suffered a ratings downgrade by Standard & Poor's that put it in danger of collapse.
WaMu "was under severe liquidity pressure," FDIC Chairman Sheila Bair told reporters in a conference call.
"For all depositors and other customers of Washington Mutual Bank, this is simply a combination of two banks," Bair said in a statement. "For bank customers, it will be a seamless transition. There will be no interruption in services and bank customers should expect business as usual come Friday morning."
Besides JPMorgan Chase, Wells Fargo & Co., Citigroup Inc., HSBC, Spain's Banco Santander and Toronto-Dominion Bank of Canada were also reportedly possible suitors. WaMu was believed to be talking to private equity firms as well.
The seizure by the government means shareholders' equity in WaMu was wiped out. The deal leaves private equity investors including the firm TPG Capital, which led a $7 billion cash infusion in the bank this spring, on the sidelines empty handed.
WaMu ran into trouble after it got caught up in the once-booming subprime mortgage business. Troubles then spread to other parts of WaMu's home loan portfolio, namely its "option" adjustable-rate mortgage loans. Option ARM loans offer very low introductory payments and let borrowers defer some interest payments until later years. The bank stopped originating those loans in June.
Problems in WaMu's home loan business began to surface in 2006, when the bank reported that the division lost $48 million, compared with net income of about $1 billion in 2005.
At the start of 2007, following the release of the company's annual financial report, then-CEO Kerry Killinger said the bank had prepared for a slowdown in its housing business by sharply reducing its subprime mortgage lending and servicing of loans. Alan H. Fishman, the former president and chief operating officer of Sovereign Bank and president and CEO of Independence Community Bank, replaced Killinger earlier this month.
As more borrowers became delinquent on their mortgages, WaMu worked to help troubled customers refinance their loans as a way to avoid default and foreclosure, committing $2 billion to the effort last April. But that proved to be too little, too late.
At the same time, fears of growing credit problems kept investors from purchasing debt backed by those loans, drying up a source of cash flow for banks that made subprime loans.
In December, WaMu said it would shutter its subprime lending business and reduce expenses with layoffs and a dividend cut.
The bank in July reported a $3 billion second-quarter loss _ the biggest in its history _ as it boosted its reserves to more than $8 billion to cover losses on bad loans. Over the last three quarters, it added $10.9 billion to its loan-loss provisions.
JPMorgan Chase said it was not acquiring any senior unsecured debt, subordinated debt, and preferred stock of WaMu's banks, or any assets or liabilities of the holding company, Washington Mutual Inc. JPMorgan also said it will not take on the lawsuits facing the holding company.
JPMorgan Chase said the acquisition will give it 5,400 branches in 23 states, and that it plans to close less than 10 percent of the two companies' branches.
The WaMu acquisition would add 50 cents per share to JPMorgan's earnings in 2009, the bank said, adding that it expects to have pretax merger costs of approximately $1.5 billion while achieving pretax savings of approximately $1.5 billion by 2010.
"This is a definite win for JPMorgan," said Sebastian Hindman, an analyst at SNL Financial, who said JPMorgan should be able to shoulder the $31 billion writedown to WaMu's portfolio.
___
AP Business Writers Marcy Gordon in Washington and Sara Lepro in New York contributed to this report.
http://wtop.com/?nid=111&sid=1485533

China banks told to halt lending to US banks-SCMP
BEIJING, Sept 25 (Reuters) - Chinese regulators have told domestic banks to stop interbank lending to U.S. financial institutions to prevent possible losses during the financial crisis, the South China Morning Post reported on Thursday.
The Hong Kong newspaper cited unidentified industry sources as saying the instruction from the China Banking Regulatory Commission (CBRC) applied to interbank lending of all currencies to U.S. banks but not to banks from other countries.
"The decree appears to be Beijing's first attempt to erect defences against the deepening U.S. financial meltdown after the mainland's major lenders reported billions of U.S. dollars in exposure to the credit crisis," the SCMP said.
A spokesman for the CBRC had no immediate comment. (Reporting by Alan Wheatley and Langi Chiang; editing by Ken Wills)
http://www.reuters.com/article/marketsNews/idUSPEK16693720080925?sp=true

Eeyore's news and view (sometimes)

We are are on a slow road to Socialism, Instead of making stronger and better members of this Country we are making them weaker. If you never test them and make them live with the consequences of their actions, a person becomes dependent. We started as a Nation of independent peoples that would come together as needed to defend it self. When people become dependent they become servants to the rulers. Congress is pushing us further down this road instead of trying to help, make people better people. Remember "we the people".

Stopping a Financial Crisis, the Swedish Way By CARTER DOUGHERTYPublished: September 22, 2008 A banking system in crisis after the collapse of a housing bubble. An economy hemorrhaging jobs. A market-oriented government struggling to stem the panic. Sound familiar?Swedish National Debt OfficeBo Lundgren, finance minister during the 1992 crisis. It does to Sweden. The country was so far in the hole in 1992 — after years of imprudent regulation, short-sighted economic policy and the end of its property boom — that its banking system was, for all practical purposes, insolvent.But Sweden took a different course than the one now being proposed by the United States Treasury. And Swedish officials say there are lessons from their own nightmare that Washington may be missing.Sweden did not just bail out its financial institutions by having the government take over the bad debts. It extracted pounds of flesh from bank shareholders before writing checks. Banks had to write down losses and issue warrants to the government.That strategy held banks responsible and turned the government into an owner. When distressed assets were sold, the profits flowed to taxpayers, and the government was able to recoup more money later by selling its shares in the companies as well. “If I go into a bank,” said Bo Lundgren, who was Sweden’s finance minister at the time, “I’d rather get equity so that there is some upside for the taxpayer.”Sweden spent 4 percent of its gross domestic product, or 65 billion kronor, the equivalent of $11.7 billion at the time, or $18.3 billion in today’s dollars, to rescue ailing banks. That is slightly less, proportionate to the national economy, than the $700 billion, or roughly 5 percent of gross domestic product, that the Bush administration estimates its own move will cost in the United States.But the final cost to Sweden ended up being less than 2 percent of its G.D.P. Some officials say they believe it was closer to zero, depending on how certain rates of return are calculated.The tumultuous events of the last few weeks have produced a lot of tight-lipped nods in Stockholm. Mr. Lundgren even made the rounds in New York in early September, explaining what the country did in the early 1990s.A few American commentators have proposed that the United States government extract equity from banks as a price for their rescue. But it does not seem to be under serious consideration yet in the Bush administration or Congress.The reason is not quite clear. The government has already swapped its sovereign guarantee for equity in Fannie Mae and Freddie Mac, the mortgage finance institutions, and the American International Group, the global insurance giant.Putting taxpayers on the hook without anything in return could be a mistake, said Urban Backstrom, a senior Swedish finance ministry official at the time. “The public will not support a plan if you leave the former shareholders with anything,” he said.The Swedish crisis had strikingly similar origins to the American one, and its neighbors, Norway and Finland, were hobbled to the point of needing a government bailout to escape the morass as well.Financial deregulation in the 1980s fed a frenzy of real estate lending by Sweden’s banks, which did not worry enough about whether the value of their collateral might evaporate in tougher times.Property prices imploded. The bubble deflated fast in 1991 and 1992. A vain effort to defend Sweden’s currency, the krona, caused overnight interest rates to spike at one point to 500 percent. The Swedish economy contracted for two consecutive years after a long expansion, and unemployment, at 3 percent in 1990, quadrupled in three years.After a series of bank failures and ad hoc solutions, the moment of truth arrived in September 1992, when the government of Prime Minister Carl Bildt decided it was time to clear the decks.Standing shoulder-to-shoulder with the opposition center-left, Mr. Bildt’s conservative government announced that the Swedish state would guarantee all bank deposits and creditors of the nation’s 114 banks. Sweden formed a new agency to supervise institutions that needed recapitalization, and another that sold off the assets, mainly real estate, that the banks held as collateral.Sweden told its banks to write down their losses promptly before coming to the state for recapitalization. Facing its own problem later in the decade, Japan made the mistake of dragging this process out, delaying a solution for years.Then came the imperative to bleed shareholders first. Mr. Lundgren recalls a conversation with Peter Wallenberg, at the time chairman of SEB, Sweden’s largest bank. Mr. Wallenberg, the scion of the country’s most famous family and steward of large chunks of its economy, heard that there would be no sacred cows.The Wallenbergs turned around and arranged a recapitalization on their own, obviating the need for a bailout. SEB turned a profit the following year, 1993.“For every krona we put into the bank, we wanted the same influence,” Mr. Lundgren said. “That ensured that we did not have to go into certain banks at all.”By the end of the crisis, the Swedish government had seized a vast portion of the banking sector, and the agency had mostly fulfilled its hard-nosed mandate to drain share capital before injecting cash. When markets stabilized, the Swedish state then reaped the benefits by taking the banks public again.More money may yet come into official coffers. The government still owns 19.9 percent of Nordea, a Stockholm bank that was fully nationalized and is now a highly regarded giant in Scandinavia and the Baltic Sea region.The politics of Sweden’s crisis management were similarly tough-minded, though much quieter.Soon after the plan was announced, the Swedish government found that international confidence returned more quickly than expected, easing pressure on its currency and bringing money back into the country. The center-left opposition, while wary that the government might yet let the banks off the hook, made its points about penalizing shareholders privately.“The only thing that held back an avalanche was the hope that the system was holding,” said Leif Pagrotzky, a senior member of the opposition at the time. “In public we stuck together 100 percent, but we fought behind the scenes.”http://www.nytimes.com/2008/09/23/busin ... ref=slogin
Also at and a good site toboot, is http://ml-implode.com/staticnews/2008-09-24_StoppingaFinancialCrisistheSwedishWay.html

We have no or little soveriengity left, we don't need their help,
G7 nations pledge action to ensure stability

By David Lawder and James Mackenzie Mon Sep 22, 11:32 AM ET
WASHINGTON/PARIS (Reuters) - Group of Seven nations welcomed the $700 billion U.S. markets bailout plan on Monday and said they were prepared to step up international cooperation to protect the world's financial and banking system.
But a day after Treasury Secretary Henry Paulson said he was "aggressively" encouraging other countries to put in place bailout packages of their own, there was little sign other G7 governments were prepared to follow Washington's lead.
"We pledge to enhance international cooperation to address the ongoing challenges in the global economy and world markets and maintain heightened close cooperation between finance ministries, central banks and regulators," the G7 ministers said in a statement following a conference call on Monday lasting 15-20 minutes.
"We are ready to take whatever actions may be necessary, individually and collectively, to ensure the stability of the international financial system," they said.
The statement, a few weeks before G7 finance ministers and central bank governors meet in Washington on October 10, follows a tumultuous week that started with the demise of Lehman Brothers and ended with one of the biggest financial rescues in history.
The conference call at 7:30 a.m. EDT, which was convened on Sunday, followed intense telephoning between senior officials over recent days and a preparatory call by deputies to the ministers and central bank governors, a G7 source told Reuters.
The statement said ministers welcomed the "extraordinary actions" taken by Washington to remove illiquid assets that have contaminated banks' balance sheets and fuelled a financial crisis widely seen as the worst since the 1930s.
LITTLE APPETITE
The world's big central banks have already joined in a coordinated move with the U.S. Federal Reserve to pump hundreds of billions of dollars in extra funding into markets to prevent the world financial system from seizing up in a credit freeze.
But there was little appetite to mimic Paulson's scheme to buy up toxic mortgage-related debt from financial firms.
"At the moment, I don't think Japan needs to launch a program similar to that of the United States," Japanese Vice Finance Minister Kazuyuki Sugimoto told reporters in Tokyo, echoing similar comments from France, Britain and Germany.
The European Union also made it clear that it would not be joining a rescue package. EU Monetary Affairs Commissioner Joaquin Almunia told a conference in Slovakia that individual national governments would have to decide on their own.
"It's up to them to consider whether they can follow this initiative," he said.
French President Nicolas Sarkozy, whose country holds the rotating EU presidency, is visiting the United States this week for a United Nations meeting and is expected to talk to U.S. officials about the crisis.
But governments outside the United States have generally been careful to draw a distinction between Wall Street and their own financial institutions.
Canadian Prime Minister Stephen Harper said Canada's financial system had stronger accountability than that of the United States, while France's Economy Minister Christine Lagarde said French banks were better balanced than their U.S. counterparts.
"Everything is affected like all banks in the world but there are no worries over the solidity of these French banks," she told RMC radio on Monday.
http://news.yahoo.com/s/nm/20080922/bs_nm/financials_g7_dc

Iran moves closer to nukes capability
George Jahn, ASSOCIATED PRESSThursday, September 25, 2008
Two years? One? Even less?
Opinions differ on how close Iran may be to developing a nuclear weapon, but concerned governments and experts agree the time to stop Tehran is growing short - and the options are limited.
The time frame is increasingly important because of the possibility that Israel or the United States might opt for a military strike against the Islamic republic if either judged that all diplomatic options to end its nuclear defiance had been exhausted.

AGENCE FRANCE-PRESSE/GETTY IMAGES Iranian President Mahmoud Ahmadinejad (center) and top commanders attend a military parade (below) in Tehran on Sunday to commemorate the 28th anniversary of Iran's 1980-88 war with Iraq. Amid its continuing nuclear standoff with the West, Mr. Ahmadinejad says the country's military will "break the hand" of invaders if attacked.
Also, with Tehran showing no signs of giving up uranium enrichment or heeding other international demands, the diplomatic window is growing increasingly narrow.
That fact gives special significance to a meeting this week of the 35-nation board of the International Atomic Energy Agency (IAEA) and its chief focus of what to do about Iran.
Hard-line Iranian President Mahmoud Ahmadinejad made his annual appearance in New York at the U.N. General Assembly this week, where he told fellow heads of state on Tuesday that Iran has an "inalienable right" to produce nuclear fuel for peaceful purposes.
Mr. Ahmadinejad also appeared to stoke the flames on Sunday, declaring that Iran's military will "break the hand" of anyone targeting his country's nuclear facilities. He spoke during a military parade displaying various types of Iranian-made missiles. Also in the parade was a military truck carrying a huge banner saying, "Israel should be eliminated from the universe" in both English and Farsi.
Iran insists its nuclear activities are geared only toward generating power, but Israel says the Islamic republic could have enough nuclear material to make its first bomb within a year. The European Union warned Wednesday that Iran is nearing the ability to arm a nuclear warhead, but the United States estimates that Tehran is still at least two years away from that stage.
At the low end is physicist and former U.N. nuclear inspector David Albright. He says Tehran could reach weapons capacity in as little as six months through uranium enrichment.
An IAEA report drawn up for the IAEA board meeting says Tehran has increased the number of centrifuges used to process uranium to nearly 4,000 from 3,000 just a few months ago.
Mr. Albright, whose Washington-based Institute for Science and International Security closely tracks suspect secret proliferators, also has been able to extrapolate other information from the report that is less obvious but of at least equal concern.
Iran, he says, has managed to iron out most of the bugs in the intensely complicated process of enrichment that often saw the centrifuges breaking down. The machines, he says, "now appear to be running at approximately 85 percent of their stated target capacity, a significant increase over previous rates."
That, he says means they can produce more enriched uranium faster. Though the IAEA says the machines so far have spewed out only low-enriched material suitable solely for nuclear fuel, producing enough of that can make it easy to "break out" quickly by reprocessing it to weapons-grade uranium suitable for the fissile core of a warhead.
To date, Iran has produced nearly 1,000 pounds of low-enriched uranium, the report says - close to the 1,500-pound minimum Mr. Albright says is needed to produce the 45 to 60 pounds needed for a simple nuclear bomb under optimal conditions.
With Iran's centrifuges running ever more smoothly, it "is progressing toward this capability and can be expected to reach it in six months to two years," Mr. Albright said.
Additional work - making a crude bomb to contain the uranium - would take no more than "several months," he said.
That work could be done secretly and consecutively with the last stages of weapons-grade enrichment. With Iran limiting access of IAEA inspectors to facilities it has declared to the agency, the U.N. nuclear monitor is blindsided in efforts to establish whether such covert atomic work is going on.

Iran's President Mahmoud Ahmadinejad addresses the 63rd session of the United Nations General Assembly at U.N. headquarters in New York Tuesday. He has repeatedly made threats against Israel.
Iran insists it is an innocent victim of U.S. pressure. However, international concern has grown enough to result in three sets of U.N. Security Council sanctions over the past two years. Also, Iranian stonewalling of IAEA inspectors probing claims that it actively tried to modify a missile to carry a nuclear payload and conducted other weapons-related research has added to fears.
The IAEA report prepared for the board meeting starting Monday faulted Iran for blocking efforts to further investigate the suspicions, based on intelligence from the United States and several other IAEA member nations.
Part of the report spoke of what appeared to be drawings and calculations by Iranian engineers on reconfiguring its Shahab-3 missile to be able to carry a nuclear payload.
Iranian officials say the missile has a range of 1,250 miles, enabling a strike on Israel and most of the Middle East.
Such reports stoke Israeli fears and may force the Jewish state's hand.
Beyond veiled warnings from Israeli leaders of a possible last-resort strike, the country is building its capacities with weapons that could spearhead such action.

ASSOCIATED PRESS PHOTOGRAPHS A poster of Iranian supreme leader Ayatollah Ali Khamenei is the backdrop for a missile during a military exhibition in Tehran Tuesday marking the 28th anniversary of the onset of the 1980-88 Iran-Iraq war. Experts differ on how close Iran is to producing a nuclear bomb.
It has purchased 90 F-16I fighter planes, which can carry enough fuel to reach Iran, and it will receive 11 more by the end of next year. It has bought two new Dolphin submarines from Germany reportedly capable of firing nuclear-armed warheads - in addition to the three it already has.
This summer it carried out air maneuvers in the Mediterranean that touched off an international debate over whether they were a "dress rehearsal" for an imminent attack, a stern warning to Iran or a just a way to get allies to step up the pressure on Tehran to stop building nukes.
Former Israeli Deputy Defense Minister Ephraim Sneh told AP on Sunday that "the military option for Israel is the last resort."
Still, those now in power leave no doubt that it remains on the table.
"If Israeli, U.S., or European intelligence gets proof that Iran has succeeded in developing nuclear weapons technology, then Israel will respond in a manner reflecting the existential threat posed by such a weapon," Israeli Deputy Prime Minister Shaul Mofaz said recently.
http://www.washingtontimes.com/news/2008/sep/25/tehrans-threat/

Commentary: Financial meltdown is an absolute disaster

Editor's note: Glenn Beck is on CNN Headline News nightly at 7 and 9 ET and also is host of a conservative national radio talk show.

Glenn Beck says the financial crisis has become severe and a solution is needed right away.

NEW YORK (CNN) -- When I see something on the horizon that I consider serious, all I can do is dive in and do as much homework as my brain can possibly handle.

Then, after I digest the information, I look around for the smartest people I can find and talk to them. And then I e-mail them.

Then I call them at home during their child's fourth birthday party. This is why there's not a long line of people gathering to be my friend (among other things).

Doing my homework and then listening to the best brains from both sides of an issue allows me to crystallize my opinions better than any other method I've tried.

When I first started to truly understand the economy, one of the smartest people I began speaking to was Nouriel Roubini, chairman of RGE Monitor and professor of economics at New York University's Stern School of Business.

Right here on CNN.com, after sifting through all of Roubini's "smart guy" language, I attempted to boil down the five levels of economic disaster that we could be facing. Like our military's DEFCON (a one-to-five scale, with one being the most serious), the "DEFCONOMY scale" has been eerily prescient so far. And believe me, this isn't a set of predictions that either Mr. Roubini or I wanted to turn out to be correct.

Back in February when the column was published, I was being called crazy for being too pessimistic. I had become a bit of a dark cloud to be around. No one wants to grab lunch with the guy constantly whining about the sky falling, especially when things seemed to be going generally well.

At the time, most people weren't even sure we were on the DEFCONOMY scale at all. Now, we've clearly raced passed DEFCONOMY 5, 4, and likely 3 as well.

Look at the description of DEFCONOMY 3:

"Some banks begin to crack under the pressure of continuing write-downs and mounting defaults by consumers. A national or large regional bank finally collapses, triggering hedge fund failures and general chaos on Wall Street, potentially leading to a 1987-style market crash.

Odds we get here: Very good. Roubini says that we'll likely socialize the losses, "effectively nationalizing the mortgages or the banks."

Any of that sound familiar? The Wall Street Journal reported that last week, "the market for mortgage-backed securities disappeared" and that the "financial system was behaving like a patient losing blood pressure."

As we threaten to cross into DEFCONOMY 2, the government rushed to bring us into the current bailout debate and stop the bleeding. But it may be too late -- my gut tells me we're already in Defconomy 2, and if true -- the transition to Defconomy 1 may be far quicker than many expect. To show how serious of a situation we are in, Defconomy 1 on Roubini's list is the great depression.

So now that we're here, what do we do? I am massively conflicted about this bailout program. The idea of government stepping in to bail out international banks that were reckless with their own business literally makes my stomach churn. We are privatizing gains and socializing losses.

As George Will wrote this week: "Treasury Secretary Paulson, asked about conservative complaints that his rescue program amounts to socialism, said, essentially: This is not socialism, this is necessary. That non sequitur might be politically necessary, but remember that government control of capital is government control of capitalism."

Unfortunately, he's right. In fact, it would have to take an absolute disaster to make me even consider supporting something like this. Welcome to that absolute disaster.

In the weeks following that DEFCONOMY column, I moved from thinking this meltdown scenario was a frightening possibility to realizing it was a near inevitability.

While it took the people in power far too long to recognize it, they are now understanding the same sad truth. This bailout plan is not a good idea -- it's an absolutely terrible idea. It's just the only idea we have left.

Our financial system is like a 747 flying around with all four of our engines on fire. The bailout effort will not stop us from landing hard, but without it, we may simply drop out of the sky. iReport.com: Will a bailout save us?

What Congress is attempting is a last-second search for an open field to land this plane with as little damage as possible. With that in mind, I think some kind of action may be a necessary evil, but we must be very, very careful.

Action for the sake of action, much like change for the sake of change, doesn't solve problems. It usually inflames them. And what's worse is that it creates brand-new catastrophes we haven't even considered yet. Wall Street and Congress have been playing with fire, and now it's Main Street that's beginning to sweat.

http://www.cnn.com/2008/POLITICS/09/24/beck.bailout/index.html

Well this is not really political, it is just the turth. What a bunch of hypocrites.

Flashback to the 1990s: Origins of the Credit Crisis

It’s one of the hidden success stories of the Clinton era. In the great housing boom of the 1990s, black and Latino homeownership has surged to the highest level ever recorded. The number of African Americans owning their own home is now increasing nearly three times as fast as the number of whites; the number of Latino homeowners is growing nearly five times as fast as that of whites.

In 1992, [a majority Democratic] Congress mandated that Fannie and Freddie increase their purchases of mortgages for low-income and medium-income borrowers. Operating under that requirement, Fannie Mae, in particular, has been aggressive and creative in stimulating minority gains. It has aimed extensive advertising campaigns at minorities that explain how to buy a home and opened three dozen local offices to encourage lenders to serve these markets.

Most importantly, Fannie Mae has agreed to buy more loans with very low down payments–or with mortgage payments that represent an unusually high percentage of a buyer’s income. That’s made banks willing to lend to lower-income families they once might have rejected.

The top priority may be to ask more of Fannie Mae and Freddie Mac. The two companies are now required to devote 42% of their portfolios to loans for low- and moderate-income borrowers; HUD, which has the authority to set the targets, is poised to propose an increase this summer. Although Fannie Mae actually has exceeded its target since 1994, it is resisting any hike. It argues that a higher target would only produce more loan defaults by pressuring banks to accept unsafe borrowers.

~LA Times article on May 31, 1999

MP: Government policy turned millions of perfectly good renters into terribly bad homeowners.
http://mjperry.blogspot.com/2008/09/flashback-to-1990s-origins-of-credit.html

Eeyores news and view

City abuse, what a bunch of idiots
City bylaws bring down pirate ship tree house September 20, 2008 - 11:30pm
VANCOUVER, British Columbia (AP) - The front yard of a house in a tony British Columbia neighborhood is a little less welcoming for pirates now.
Architect Andrew Dewberry and a crew of friends spent Saturday dismantling the pirate ship tree house he's had in his Vancouver yard for two years. He said he had no choice after a court ordered it to be removed for not complying with city bylaws.
Dewberry had to explain the situation to his sons Jack, 9, and Sam, 7, before the tree house came down. He said, "They've had a lot of joy with the tree fort."
Jack, who stood with a friend and watched the dismantling, said, "We wanted to sleep in it over the summer one time, but we didn't get around to it and now we can't."
In July, the judge in the case admired the workmanship of the ship, complete with plastic cannons, in a perch 6 1/2 feet up a large, leafy tree in front of the family's home. But the judge said its merits were irrelevant to whether the tree house violated city bylaws.
Dewberry said the tree house would be auctioned for the Boys and Girls Club of Vancouver. The benefit is set for Oct. 16.

http://wtop.com/?nid=456&sid=1482187




China milk scandal claims victim outside mainland September 21, 2008 - 11:36am

BEIJING (AP) - A Hong Kong toddler has developed a kidney stone after drinking Chinese milk _ the first reported victim outside the mainland affected by a widening scandal over a toxic chemical found in baby formula and other Chinese dairy products.
More than 6,200 infants have become sick and four babies have died in China after being fed baby formula laced with melamine, a banned industrial chemical.
No illnesses had been reported elsewhere until the Hong Kong government said late Saturday that a 3-year-old girl was diagnosed with a kidney stone after drinking milk produced by the Chinese dairy Yili that contained melamine.
The Hong Kong government also announced Sunday that tests found melamine in Chinese-made Nestle milk. The Dairy Farm milk was made by Nestle's division in the Chinese coastal city Qingdao, it said.
The Swiss food and drinks giant issued a statement Sunday saying that none of its China-made dairy products contained melamine.
"Nestle once again expresses confidence that none of its products in China is made from milk adulterated with melamine," the statement said. It did not specifically respond to the Hong Kong report of tainted Dairy Farm milk.
Nestle offices in Hong Kong and Geneva did not immediately respond to a message seeking comment. Calls after work hours to its Beijing office and Beijing hot line went unanswered.
Meanwhile, Singapore said Sunday melamine was detected in samples of White Rabbit-brand Creamy Candy. The popular Chinese milk candy was pulled from shelves in the Philippines last year after health officials there claimed it was tainted with formaldehyde.
Chinese candy maker Guan Sheng Yuan Co. denied the Philippine allegations, saying the candy tested was likely a counterfeit version and subsequent tests showed samples of the candy were formaldehyde-free.
Already on Friday, Singapore suspended the sale and import of all Chinese milk and dairy products including milk, ice-cream, yogurt, chocolate, biscuits and candy, as well as any other products containing milk from China as an ingredient.
Japan, Malaysia and Brunei have also recalled or banned Chinese-made dairy products.
Since the problem of tainted milk products became public knowledge less than two weeks ago, the crisis has spread to include almost all of China's biggest dairy companies.
A top official with the World Health Organization said Sunday that delays in releasing critical information about contaminated Chinese milk had hampered Beijing's ability to rapidly deal with the problem and warn consumers.
Shigeru Omi, the WHO's head of Western Pacific operations, told reporters at a press conference in Manila that "some people withheld the information for some time," but he did not give specifics.
The scandal began with complaints over milk powder by Sanlu Group Co. _ one of China's best-known and most respected brands. But it quickly became a much larger crisis as government tests found that one-fifth of the companies producing baby milk powder had melamine in their products.
A New Zealand stakeholder in Sanlu has said it was told before the start of the Beijing Olympics on Aug. 8 that there was a problem. The dairy farmers' group Fonterra, which owns 43 percent of Sanlu Group, told the New Zealand government, which informed Chinese officials.
The public was not told until Sept. 11 that the powder, used in baby formula and other products, was laced with melamine.
Melamine is used in making plastics and is high in nitrogen, which registers as protein in tests of milk. Though health experts believe ingesting minute amounts poses no danger, melamine can cause kidney stones, which can lead to kidney failure. Infants are particularly vulnerable.
Some of the farmers who sell milk to Chinese food companies are thought to have used melamine to disguise watered-down milk and fatten profit margins hurt by rising costs for feed, fuel and labor.
The parents of the Hong Kong girl diagnosed with a kidney stone took her for a precautionary checkup because she had been drinking Yili milk daily for the past 15 months. Yili Industrial Group Co. is one of 22 companies whose milk and dairy products were recalled after batches of their products were found to contain melamine.
The toddler was in good condition after receiving medical treatment and had been discharged from the hospital, the government said.
China's communist leadership has launched high-profile efforts to show it is on top of the crisis, with Premier Wen Jiabao appearing on state-run television Sunday to say dairy companies had to show more "social responsibility."
Wen was shown visiting a Beijing hospital where children were having health checks. He also stopped at a supermarket to look at dairy products.
"What we need to do now is to ensure that nothing like this happens in the future, not only in dairy products but in all food," Wen said.
Food and product safety scandals have been a feature of Chinese life. Only last year, the government promised to overhaul inspection procedures after exports of medicines, toys, pet food ingredients and other products killed and sickened people and pets in North and South America.
The chemical in the dangerous pet food was the same as in the milk scandal _ melamine.
Many of the largest companies whose products have been recalled, such as Yili Industrial Group Co. and Mengniu Dairy Group Co., did not have government inspections before the problem became public. The government scrapped that exemption this past week.
___
Associated Press reporter Min Lee in Hong Kong contributed to this report.

http://wtop.com/?nid=105&sid=1478415

Cash for Trash
By PAUL KRUGMAN
Published: September 21, 2008
Some skeptics are calling Henry Paulson’s $700 billion rescue plan for the U.S. financial system “cash for trash.” Others are calling the proposed legislation the Authorization for Use of Financial Force, after the Authorization for Use of Military Force, the infamous bill that gave the Bush administration the green light to invade Iraq.
http://www.nytimes.com/2008/09/22/opinion/22krugman.html?_r=1&th&emc=th&oref=slogin

12th bank failure of the year announced
Regulators close down Ameribank Inc., a West Virginia-based-bank with total assets of $115 million.
NEW YORK (CNNMoney.com) -- Ameribank Inc. was shut down on Friday by the Office of the Thrift Supervision, making it the 12th bank this year to go under.
The Northfork, West Virginia bank had total assets of $115 million and total deposits of $102 million, according to a statement on the Federal Deposit Insurance Corporation Web site.
The FDIC was named receiver and announced that it entered into purchase and assumption agreements with Pioneer Community Bank, Inc., Iaeger, West Virginia, and the Citizens Savings Bank, Martins Ferry, Ohio, to take over all of Ameribank's deposits.
Ameribank has five branches located in West Virginia and three branches located in Ohio. Branches in West Virginia will reopen on Monday and Ohio branches will reopen on Saturday.
All customer accounts were automatically transferred to the two new banks and the full amount of their deposits will automatically be insured, the FDIC said.
Customers of the banks can still access their money over the weekend by writing checks or using ATM or debit cards, according to the statement by the FDIC.
A year of bank failures
This year 12 banks have been forced to close their doors. In July IndyMac was closed down marking the largest collapse of an FDIC-insured institution since 1984. The Pasadena, Calif.-based bank failed because it backed risky home loans. With the special Alt-A home loan that IndyMac offered, a home buyer had to show little evidence of income and assets.
When IndyMac was shut down, it had assets of $32 billion and deposits of $19 billion. While the FDIC protected most of IndyMac customer's assets, some customers lost some of their deposits.
The FDIC insures the assets held by the 8,451 institutions with a total of $13.4 trillion.
First Published: September 19, 2008: 8:05 PM EDT
Will the rescue plan work?Bailout cost: higher than you think

GM Will Draw on Remaining $3.5 Billion in Credit Line
By Jeff Green and Alan Ohnsman
Sept. 20 (Bloomberg) -- General Motors Corp., burning through cash after three years of losses, will tap the remaining $3.5 billion of a revolving credit line as the crisis on Wall Street threatens to crimp companies' ability to borrow.
The balance of the $4.5 billion line will go to help cover restructuring costs, GM said in a statement late yesterday. The Detroit-based automaker said it also completed a $322 million debt-to-equity exchange.
``The disruption in the credit markets have been profound,'' said Pete Hastings, a fixed-income analyst at Morgan Keegan & Co. in Memphis, Tennessee. ``GM has its own set of sizable problems, but I think this was a liquidity play.''
Banks have tightened lending amid the worst housing market since the Great Depression, and this week's bankruptcy of Lehman Brothers Holdings Inc. and government takeover of American International Group Inc. may further curb access to credit.
GM Chief Executive Officer Rick Wagoner has orchestrated a plan to raise $4 billion to $7 billion by selling assets and adding debt to ensure it has enough liquidity to operate through the end of 2009. GM, the world's largest automaker, has lost $69.8 billion since the end of 2004, its last profitable year.
``GM felt it was a very prudent thing to have the cash on hand to borrow at very attractive rates,'' spokeswoman Julie Gibson said in an interview. ``The timing was right, given the obvious instability in the financial markets.''
Not Expected
``This is not something we expected they would need to do until next year,'' said Mirk Mikelic, senior portfolio manager at Fifth Third Asset Management in Grand Rapids, Michigan, which oversees $22 billion in assets including Ford and GM debt.
GM has its own cash needs and its decision to use the credit line may add to the concern in the capital markets. ``It's not good either way,'' said Mikelic.
The automaker's shares rose $1.68, or 15 percent, to $13.08 yesterday in New York Stock Exchange composite trading. The credit-line action was announced after the close of regular trading. The shares have dropped 47 percent this year.
The credit line has been in place since July 2006. Funds being accessed may also be used to retire $750 million of debt coming due in October and for more than $1.2 billion of reorganization costs for bankrupt Delphi Corp., a former GM unit, the automaker said. Delphi disclosed GM's increased bailout costs Sept. 12.
`Mechanism Test'
GM's use of the first $1 billion from the credit line, announced Aug. 1, was a step to ``test the mechanism'' of that borrowing and help meet costs at a ``seasonal low point,'' Chief Financial Officer Ray Young told analysts on Aug. 13.
GM burned through $3.6 billion in the second quarter and said that at the end of June its supply of cash, marketable securities and other funds available fell to $21 billion from $23.9 billion at the end of the first quarter, and $23.6 billion a year earlier. The revolver wasn't included in those figures.
Steps by the U.S. government to shore up the financial system should prevent GM's mining of its revolver from becoming part of a flood of companies drawing down unused funds, Morgan Keegan's Hastings said.
``The prudent CFO or CEO may be tapping their lines of credit, especially if they know they are going to need liquidity in the short term and they're concerned about the market,'' Hastings said. The Federal Reserve's action ``may prompt people to wait and see now, because people certainly were on the verge of panic.''
Government Action
The U.S. government yesterday said it is taking steps to cleanse banks of troubled assets and halt an exodus of investors from money markets in the biggest expansion of federal power over the financial system since the Depression.
The government took over AIG, Fannie Mae and Freddie Mac in the past 13 days, a period when Lehman Brothers filed for bankruptcy and Americans pulled a record $89 billion from money- market funds.
The Bush administration sent to Congress today a $700 billion proposal granting broad power to the U.S. Treasury Department to acquire troubled assets now on the balance sheets of U.S.-based financial companies.
The legislation gives Treasury Secretary Henry Paulson authority to own as much as $700 billion in mortgage-related assets at one time. The bill would raise the nation's debt ceiling to $11.315 trillion from its current $10.615 limit.
Government Loans
GM, along with Ford Motor Co., Chrysler LLC and their suppliers, are also asking Congress to appropriate about $7 billion to back $25 billion in government loans to pay for the shift to build more fuel-efficient models.
It's possible many of the actions taken to gain funds from the market were initiated before the Fed action and new actions may abate, Hastings said.
Ford, the second-largest U.S. automaker, on Sept. 16 said it was assessing the impact of Lehman's failure on $1.13 billion of lending agreements it had with subsidiaries of the investment bank.
GMAC LLC, the money-losing home and auto lender partly owned by GM, renewed a credit facility with Citigroup Inc. yesterday, giving the company access to $13.8 billion, down from $21.4 billion that was available last year. GM sold 51 percent of GMAC to Cerberus Capital Management LP in November 2006.
International Lease Finance Corp., the airplane-leasing company owned by AIG, said Sept. 19 it is borrowing $6.5 billion in emergency funding, the maximum amount allowed under its three credit lines.
Seeking Cash
ILFC asked its lenders for the cash on Sept. 16, the day New York-based AIG agreed to give the government an 80 percent stake of itself in exchange for an $85 billion loan.
AIG's unit that makes home and auto loans, American General Finance Inc., said Sept. 19 in a separate filing that it borrowed $4.58 billion under its credit facilities, and said it too asked for the money on Sept. 16.
``Everyone is running to cash, hoarding it, and we're not out of the woods yet,'' Mikelic said. ``There's a little less pressure with the government stepping in. But the government needs to keep printing money, printing securities, even if there is negative yield.''
http://www.bloomberg.com/apps/news?pid=20601087&sid=ajhGEXYAS06Y&refer=home


In a Single Week, America Sails into Uncharted Moral Territory

Monday, September 22, 2008 - Vol. 10, No. 226
Today's comment is by Jack Crooks, Currency Analyst and editor of World Currency Options and The Money Trader.
If you were lucky enough to make it through last week without any major losses, then I congratulate you.
Last week was a street fight in the markets, and I personally know plenty of traders who came out bloodied and bruised. Thanks to the active participation of central banks and the U.S. Treasury, it's now almost impossible to find your footing and stick to an investment strategy without being broadsided.
So instead of analyzing this unpredictable marketplace or trying to read Paulson's mind, we're going to review a week that will no doubt go down in history. In so doing, we'll develop a better understanding of the moral implications of the past week's events.
Week in Review: One for the History Books
If you have money on the line right now, then you know it's been a less-than-pleasant week of trading. We had one of the largest point losses in Dow history followed by a 200-point gain in the very next session. There have been more swings than you could find on the neighborhood playground. But there's also been a steady - if not growing - sense of worry.
At the heart of it all, there has been an equally steady stream of intervention hoping to relieve such concerns.
If you didn't have a chance to keep up with how things played out from day to day, let me do a quick and dirty recap:
Sunday: The Federal Reserve pumped a bunch of money into the system, increased how much it will provide in lending facilities and further liberalized the collateral it will accept in exchange for loans.
Monday: Lehman Brothers declared bankruptcy. Bank of America took control of Merrill Lynch. And AIG's fate hung in the balance.
Tuesday: The Federal Reserve denied the markets a much anticipated interest rate cut. Instead, it followed with a two-year, US$85 billion loan to bailout AIG.
Wednesday: The Treasury announced a finance program where it would auction off Treasuries, separate from what it already offers. The proceeds will go to the Federal Reserve to use for "initiatives."
Thursday: Central banks around the globe decided to join the party. They declared efforts to pump nearly US$250 billion into the global system to avert a financial train wreck.
Friday: We learned of a new initiative, spearheaded by Treasury Secretary Henry Paulson, to put together US$800 billion in a new-fangled institution and US$400 billion more at the FDIC. The money will be used to take crappy assets off troubled balance sheets and grease up money markets.
Sunday: We heard some of the nuts and bolts of Paulson's plan as he ran the talk-show circuit, and we waved goodbye to the Independent Investment Bank. That's right, Morgan Stanley and Goldman Sachs will play a pivotal role as "Bank Holding Companies" in Paulson's new plan.
Prior to this week, steps taken to stabilize the market were considered ineffective. By the looks of it, though, this week's actions tell me these guys don't want to fail in their efforts to restore order...again. But the condition of credit markets is far from cured.
Plus, there's another issue that the Fed and Treasury might have to wrestle with down the road...
Moral Hazard: Don't Worry, We're Too Big to Fail
"We cannot protect all risk in the market, and we should not do it at the risk of the taxpayer." - Richard Shelby, Alabama Senator
"Moral Hazard" is a pair of buzz words circling lunch tables, office cubicles and board rooms around the world. Why? Simply because the Fed and Treasury are taking matters into their own hands, trying to put an end to the losses wreaking havoc on the global financial system.
And in doing so, our government could be seen as endorsing the reckless lending that led us to this disaster in the first place.
However, what scares me most about these interventions is that some could create a humongous burden on the taxpayer.
The two-year US$85, billion loan from the Fed to AIG this week is an attempt to provide a controlled environment to deal with the pain, spare the financial system from the effects of extreme counterparty risk, protect the real economy and keep the bill off the taxpayer.
So what if the burden of this financial mess doesn't end up in the taxpayers' lap? Could there still be moral hazard?
Good question.
Because what kind of precedent are they setting? These are banks and institutions that took on toxic derivatives and securitized debt. They fattened up when times were good, but come crying for help now that the going has gotten tough. How many more will follow expecting the same treatment?
Perhaps this is the real issue.
JACK CROOKS, Editor of World Currency Options and The Money Trader
http://www.sovereignsociety.com/2008Archives2ndHalf/92208InaSingleWeekAmericaSailsintoUncha/tabid/4616/Default.aspx

Eeyore's News with a view

Nothing will come of it, but it is noice to see them try to scare them a little.
FBI investigating companies at heart of meltdown September 23, 2008 - 8:09pm
Federal Reserve Chairman Ben Bernanke, right, accompanied by Treasury Secretary Henry Paulson, testifies on Capitol Hill in Washington, Tuesday, Sept. 23, 2008, before the Senate Banking Committee hearing on the credit market turmoil. (AP Photo/Susan Walsh)
By LARA JAKES JORDAN Associated Press Writer
WASHINGTON (AP) - The FBI is investigating four major U.S. financial institutions whose collapse helped trigger a $700 billion bailout plan by the Bush administration, The Associated Press has learned.
Two law enforcement officials said Tuesday the FBI is looking at potential fraud by mortgage finance giants Fannie Mae and Freddie Mac, and insurer American International Group Inc. Additionally, a senior law enforcement official said Lehman Brothers Holdings Inc. also is under investigation.
The inquiries will focus on the financial institutions and the individuals that ran them, the senior law enforcement official said.
The law enforcement officials spoke on condition of anonymity because the investigations are ongoing and are in the very early stages.
Officials said the new inquiries bring to 26 the number of corporate lenders under investigation over the past year.
Spokesmen for AIG, Fannie Mae and Freddie Mac did not immediately return calls for comment Tuesday evening. A Lehman spokesman did not have an immediate comment.
Just last week, FBI Director Robert Mueller put the number of large financial firms under investigation at 24. He did not name any of the companies under investigation but said the FBI also was looking at whether any of them have misrepresented their assets.
Over the past year as the housing market cratered, the FBI has opened a wide-ranging probe of companies across the financial services industry, from mortgage lenders to investment banks that bundle home loans into securities sold to investors. Mueller has previously said the FBI's hunt for culprits in the nation's subprime mortgage crisis focused on accounting fraud, insider trading, and failure to disclose the value of mortgage-related securities and other investments.
The investigations revealed Tuesday come as lawmakers began considering whether to approve emergency legislation that would give the government broad power to buy up devalued assets from troubled financial firms.
The bailout proposed by the Bush administration is aimed at helping unlock credit and stabilize badly shaken markets in the United States and around the globe.
In the past two weeks, the government has taken over Fannie Mae and Freddie Mac, the country's two biggest mortgage companies, with a bailout plan that could require the Treasury Department to put up as much as $100 billion for each of them over time if needed to keep them afloat as mortgage losses mount.
Last week, the Federal Reserve provided an emergency $85 billion loan to AIG, which teetered on the brink of bankruptcy. Lehman Brothers was forced to file for bankruptcy after attempts to engineer a private rescue fell apart. All the companies were laid low from bad bets on complex mortgage-related securities.
Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke made the joint decision last week that the only way to stop the carnage was to deal with the root cause of all the troubles, billions of dollars of bad mortgage debt sitting on the books of major financial companies. This debt has triggered the worst credit crisis in decades, causing credit markets to essentially freeze up despite the fact that the Fed joined with major central banks around the world to pump billions of dollars of reserves into the financial system.
Additionally, the FBI is investigating failed bank IndyMac Bancorp Inc. for possible fraud. Countrywide Financial Corp., formerly the nation's largest mortgage lender and now owned by Bank of America Corp., is also under scrutiny.
http://wtop.com/?nid=116&sid=1483896

Who did not know there was price fixing? Who does not know it goes on all the time?
Tomato processing, egg products industries probed September 23, 2008 - 8:07pm
By PAUL ELIAS Associated Press Writer
SAN FRANCISCO (AP) - Federal investigators say food broker Randall Rahal liked to use a simple little test to see whether he could bribe purchasing agents at the country's biggest food companies to buy from the tomato processor he represented.
Rahal would drop a $100 bill and then pick it up and ask the potential bribe recipient: "Is it yours?" If the agent said yes, Rahal knew they were open to a "business offer," he would boast, according to an FBI search warrant affidavit filed last month in Sacramento federal court as part of a bribery and fraud inquiry that also involves Rahal's client, tomato processor SK Foods of Lemoore, Calif.
That investigation was launched in August 2005 and has since expanded into a price-fixing probe of tomatoes, 95 percent of which are processed in California.
At the same time, Justice Department spokeswoman Gina Talamona said Tuesday that investigators also were looking into price-fixing allegations in the egg industry.
Federal prosecutors already had been looking at possible price-fixing in the citrus industry as food companies wrestle with increasing costs of key food ingredients. Prices for vital ingredients such as corn and oil are soaring as demand rises around the world. And the cost pressures aren't expected to abate anytime soon.
Although federal law bars competitors from collaborating when setting their prices, Congress has created antitrust exemptions intended to help small farm groups and cooperatives bargain with large food processors. There are also exemptions for exports.
Inquiries into whether food producers overstepped those limits are being run by federal prosecutors in Sacramento and an antitrust division of the Justice Department based in Philadelphia.
In Sacramento, FBI agents tapped Rahal's telephones late last year and allege to have uncovered buyers at six food companies taking payments from him. Federal investigators also raided SK Foods on April 16. Investigators say they subsequently coaxed admissions from purchasers receiving payments at Agusa Inc., Kraft Foods Inc., Safeway Inc. and Frito-Lay, which is a division of Pepsico Inc.
Kraft Foods declined comment about the investigation.
Frito-Lay spokeswoman Aurora Gonzalez said the buyer who admitted taking payments no longer works for the company.
"We have been working with federal authorities since we first became aware of the investigation," Gonzalez said.
Investigators also say they have bank records and other evidence that buyers at B&G Foods Inc. and ConAgra Foods Inc. also took payments from Rahal, allegedly to ensure that the companies bought tomato products from SK Foods.
ConAgra spokeswoman Stephanie Childs said the company was not a target of the investigation and that the employee suspected of taking bribes was placed on administrative leave in April. Safeway spokesman Brian Dowling said the purchaser there accused of taking bribes is no longer employed by the grocery chain.
Investigators also allege that Rahal paid the bribes in exchange for bid information submitted to the companies by SK's competitors.
Rahal owns Westwood, N.J.-based Intramark USA. He could not be reached for comment because the company's telephones appear to have been disconnected.
Brian Maschler, an attorney for SK, confirmed the company was being investigated for possible price-fixing practices. He denied that SK was involved in any bribery scheme and fired Rahal in April. FBI agents allege in a court filing that they eavesdropped on telephone conversation in which SK founder and chief executive Scott Salyer encouraged Rahal's behavior.
No charges have been filed in the tomato investigation.
Two egg producers in Minnesota _ Golden Oval Eggs and Michael Foods _ noted in filings with the SEC this spring that they had been subpoenaed by the U.S. attorney's office in the Eastern district of Pennsylvania.
The subpoenas requested documents for the period between Jan. 1, 2002, through March 27, 2008, relating "primarily to the pricing, marketing and sales of our egg products," both companies wrote in their 10-Q filings.
Both companies said in the SEC filings that they intended to cooperate.
Sandie Wohlman, executive assistant of Golden Oval Eggs of Renville, Minn., referred questions on Tuesday to an attorney, who did not immediately respond to an e-mail seeking an interview.
Mark Witmer, treasurer and secretary of Michael Foods Inc. in Minnetonka, Minn., said: "We have fully responded to the request for information."
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Associated Press writers Amy Forliti in Minneapolis, Emily Fredrix in Milwaukee and Lara Jakes Jordan in Washington contributed to this report.
http://wtop.com/?nid=111&sid=1483599

Hope none of my friends are using this type of inhaler.
Inhaler lung drugs tied to heart problems, deaths September 23, 2008 - 5:07pm
By LINDSEY TANNER AP Medical Writer
CHICAGO (AP) - Inhaler drugs used by millions of people with emphysema and bronchitis may slightly raise the risk for heart attacks and even death, a study suggests.
The results aren't conclusive and inhalers provide significant relief for these patients struggling to breathe. But the study authors urged doctors to closely monitor patients who use the inhalers.
Most affected patients have both emphysema and chronic bronchitis. The condition's formal name, chronic obstructive pulmonary disease, COPD, is the nation's fourth leading cause of death.
The study's increased risks were small, and the drugs' marketer said both medicines are safe. Outside experts called the study compelling but said it has limitations that make it hard to know if the drugs or something else was at fault.
The drugs are tiotropium, sold as Spiriva Handihaler by Boehringer Ingelheim Pharmaceuticals, Inc., and ipratropium, available generically and also sold by Boehringer under the brand name Atrovent.
Spiriva, approved in 2004, and the decade-old Atrovent are used once or more daily to relax muscles and open lung airways. They've been used by 8 million patients worldwide.
A Veterans Affairs study published last week linked ipratropium with an increased risk for heart-related deaths in men.
The new study appears in Wednesday's Journal of the American Medical Association.
The company told the Food and Drug Administration earlier this year that its own data had linked Spiriva with a possible increased risk for strokes. But Boehringer and Pfizer Inc., which jointly market Spiriva, said Tuesday that they had recently given the FDA a new analysis of that data plus new long-term data, which they said shows initial concerns about strokes were unfounded.
"We strongly disagree with the conclusion" in the new study, the companies said in a statement.
COPD affects as many as 24 million Americans and kills more than 100,000 each year. It involves thickened and narrowed lung airways and excess mucous. Symptoms include persistent coughing and severe shortness of breath; smoking is a leading cause.
Patients describe COPD breathing problems as feeling like they're "living the entire day under water, unable to come to the surface," said Dr. Aaron Milstone of Vanderbilt University medical school.
The new study pooled results from 17 randomized studies comparing mostly older patients on either of the drugs with those on different medicine or dummy drugs. Randomized studies are the most rigorous kind of medical research, but Milstone said drawing conclusions from a pooled analysis can be problematic because of differences in patients' characteristics.
It found that using either drug for more than one month appeared to increase chances for fatal and nonfatal heart problems including heart attacks by more than 50 percent.
Among about 7,400 patients on either inhaled drug, 1.8 percent or 135 people developed fatal or nonfatal heart problems over a period of several weeks to several years. By contrast, among about 7,300 patients on other drugs or dummy medicine, 1.2 percent or 86 had those problems.
In absolute terms, out of 40 patients using either drug for one year, there would be one extra drug-linked death, said study author Dr. Sonal Singh of Wake Forest University's medical school.
Other drugs are used for COPD, but they also can have serious side effects, Singh said. This puts patients in "a very tough spot," he acknowledged.
He said before starting drugs, patients should try to reduce heart risks by quitting smoking, keeping blood pressure and cholesterol under control, and using oxygen.
Dr. Mark Rosen, former president of the American College of Chest Physicians and a lung specialist on New York's Long Island, said the data "are very compelling but they're not conclusive."
He said it's unclear what caused the apparent increased risks since the drugs aren't known to affect the heart. The authors said that damaging proteins involved in inflammation are thought to play a role in both COPD and heart disease.
Rosen noted that the analyzed studies weren't designed to look for heart problems, and said it's possible patients on the drugs had more heart problems to begin with.
Still, Rosen said the study "is an excellent reason to do more research to figure out why this is true, if it is true and not a statistical fluke."
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On the Net:
JAMA: http://jama.ama-assn.org

So much for trying to prove the big bang, their junk just broke down, it could not even work for a day. They will impress me when they can make a atom out of nothing. And then make the atoms smash together without their help. Pityfull really, what a waste of money.
See you next year, LHC: Atom smasher will restart in '09
So much for the end of the world. European physicists at CERN have put off the restart of the Large Hadron Collider, the world's biggest atom smasher, until next year. "The time necessary for the investigation and repairs precludes a restart before CERN’s obligatory winter maintenance period, bringing the date for restart of the accelerator complex to early spring 2009," the lab says in a statement.
“Coming immediately after the very successful start of LHC operation ... this is undoubtedly a psychological blow,” CERN Director General Robert Aymar said in the statement. “Nevertheless, the success of the LHC’s first operation with beam is testimony to years of painstaking preparation and the skill of the teams involved in building and running CERN’s accelerator complex. I have no doubt that we will overcome this setback with the same degree of rigor and application.”
Researchers outside CERN are supportive of the decision. Peter Limon, who commissioned the Tevatron (superconducting accelerator) at Fermilab said: "The LHC is a very complex instrument, huge in scale and pushing technological limits in many areas. Events occur from time to time that temporarily stop operations, for shorter or longer periods, especially during the early phases."
By Dan Vergano
http://blogs.usatoday.com/sciencefair/2008/09/see-you-next-ye.html?loc=interstitialskip