Investors run for cover as Dow plunges 416 points, worst day since Sept. 2001

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Granny says, "Dat's right - dey can lose their money too...

Asian Markets Sink on Lehman, Merrill Woes
September 16, 2008 - Asian markets plunge on Lehman, Merrill demise, fears of global financial crisis

Asian stock markets tumbled Tuesday amid growing fears of a global financial crisis as investors reacted to the demise of two of Wall Street's biggest names, Lehman Brothers and Merrill Lynch. Japan's benchmark Nikkei 225 index was down 5.3 percent to 11,560.66 in mid-afternoon trading, while Hong Kong's blue-chip Hang Seng Index shed 5.7 percent. Both markets — Asia's two biggest — had been closed for holidays on Monday, when news first broke about the dramatic events on Wall Street. Across the region, markets were all deep in the red. South Korea's Kospi was down 5.4 percent, Taiwan's benchmark was off 4.7 percent and China's Shanghai index was down 3.2 percent.

Japan's central bank on Tuesday injected 2.5 trillion yen ($24 billion) into money markets and issued a statement vowing to take measures to maintain stability in the country's financial markets. Cabinet ministers, along with the central bank chief, were also holding an emergency meeting. "The Bank of Japan will carefully monitor recent situations surrounding the U.S. financial institutions and their influences, and will continue to strive to ensure smooth settlement of funds and maintain stability in financial markets through measures such as appropriate money market operations," central bank Gov. Masaaki Shirakawa said.

The dollar also got hit, falling to 104.43 yen early Tuesday afternoon in Asia from mid-107 yen levels before the weekend. In Tokyo, the Japanese unit of Lehman Brothers Holdings Inc. requested bankruptcy protection at a Tokyo court after the 158-year-old firm filed for Chapter 11 bankruptcy in New York on Monday. The storied New York investment bank, crippled by $60 billion in soured real-estate holdings, was unable to find an investment partner to throw it a lifeline despite a flurry of last-minute negotiations over the weekend.

More ABC News: Asian Markets Plunge on Lehman, Merrill Woes

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Global market turmoil continues
Tuesday, 16 September 2008 - Major global stock markets extend losses in the aftermath of the demise of top US investment bank Lehman Brothers.

European markets opened sharply lower for a second day, with the UK's FTSE 100 and Germany's Dax both down 1.7%. Shares in Japan, South Korea and Hong Kong fell more than 5%, having been shut on Monday for public holidays. Lehman, which may be about to sell its core assets to Barclays, is the latest victim of the global credit crunch.

Banks hit

The FTSE 100 of leading UK shares fell 91 points to 5,113 in morning trade. The Dax index of leading German shares was down 106 points at 5,959 points and France's Cac 40 was down 65 points at 4,104 points. The US stock market on Monday had its worst day's trading since 9/11, with the Dow Jones index ending the day down 504.48 points, or 4.42%, at 10,917.51. Japan's benchmark Nikkei 225 index dropped 5% to a three-year low, shares in South Korea and Hong Kong shed almost 6% in value and Shanghai's index fell by about 3%.

Chinese share prices closed 4.47% lower as the fallout from Lehman Brothers outweighed Beijing's first interest rate cut in years, announced on Monday. The benchmark Shanghai Composite Index, which covers both A and B shares, was down 93.04 points at 1,986.64 after touching a low of 1,974.39. Markets in Taipei and Singapore were also sharply down, and the pattern was repeated in Australia and New Zealand, although the falls were smaller.

Bank stocks were hard hit again across Europe; in London HBOS was down about 12%, and Royal Bank of Scotland was down more than 7%. Barclays Bank - which today said it was in talks to take on some of Lehman's US operations - was one of the big fallers, down more than 5%. In Paris, Credit Agricole, Societe Generale, and BNP Paribas were all down by nearly 4%, while in Germany Commerzbank dropped 8.6% and Deutsche Bank fell 3.7%.

'Crisis'

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Guess the China bubble just popped too...

Asian markets tumble as financial fears deepen
18 Sept.`08 - Asian stocks tumbled Thursday, tracking declines on Wall Street as investors feared more companies could succumb to the global financial crisis that forced the U.S. to bail out troubled insurer American International Group Inc.

Every regional benchmark fell deeply in the red. Hong Kong's Hang Seng Index led the region's losses, tanking 1,272.86 points, or 7.22 percent, to 16,364.33 — its lowest level in over two years. In Japan, the Nikkei 225 stock index was down 445.67 points, or 3.79 percent, at 11,304.12. Australia's S&P/ASX200 index fell more than 3.5 percent, South Korea's Kospi lost 3.6 percent and Shanghai's index fell 5.8 percent.

The losses tracked U.S. markets, where the Dow Jones industrial average fell about 450 points, or 4.06 percent, to 10,609.66. Investors were unsettled by the Federal Reserve's $85 billion loan to AIG, the huge U.S. insurer that lost billions in the risky business of insuring against bond defaults. It was the latest financial giant to fall in a historic financial crisis on Wall Street that's already claimed investment banks Lehman Brothers and Merrill Lynch.

"It's a complete collapse of confidence," said Francis Lun, general manager of Fulbright Securities Ltd in Hong Kong. "The financial crisis in the U.S. is hitting everyone, everyone is running for cover. If the largest insurance company can fail, than no one is safe."

More Asian markets tumble as financial fears deepen - Yahoo! News

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Bloomberg Warns Of "Next Wave" Crisis
WASHINGTON, Sept. 17, 2008 - More Financial Pain Possible If Foreign Entities Stop Buying U.S. Debt, Says NYC Mayor

New York Mayor Michael Bloomberg warned Wednesday a "next wave" of financial pain may come from overseas if foreign entities stop buying U.S. debt. The billionaire mayor spoke before an audience at Georgetown University, telling them it's not clear who is going to continue buying U.S. debt as financial firms try to cope with a crisis of confidence on Wall Street.

The financial markets have undergone a tumultuous last week: Investment bank Lehman Brothers filed for bankruptcy and later sold off its North American trading division to British bank Barclays PLC; Insurance giant AIG needed an $85 billion bailout from the U.S. government in order to stay afloat; and investment firm Merrill Lynch sold itself to Bank of America. The mayor is scheduled to meet Thursday morning with Treasury Secretary Hank Paulson and Securities and Exchange Commission Chairman Chris Cox.

Before becoming mayor, Bloomberg made a fortune by launching a financial information company that bears his name, and he has more credibility than most politicians on economic matters. Bloomberg said he was concerned that the credit crisis in the United States may scare off foreign investors that, until now, have been willing to buy debt that the U.S. uses to maintain a deficit. "It's not clear who's going to be buying our debt," said Bloomberg. "It may very well be that the next wave is going to come back and bite us."

The mayor, a Democrat-turned-Republican-turned independent, regularly criticizes both parties, the Congress, and the White House for what he says is their lack of foresight. He said the current economic crisis is the latest example of the same problem. "We have on both sides of the aisle, on both ends of Pennsylvania Avenue, thrown caution to the wind. We pay lip service to responsibility," he said, as he sat onstage in an armchair, fielding questions from Georgetown President Jack DeGioia. Bloomberg had originally planned to give a speech about the economy, but amid the fast-moving events on Wall Street, he scrapped the speech and went with a question-and-answer session instead.

More http://www.cbsnews.com/stories/2008/...n4456693.shtml

[waltky]

An honest CEO??...

AIG CEO Rejects $22 Million Parachute; Will Others Follow?
Sept. 23, 2008 - Robert Willumstad Opted Out of His AIG Severance Package; Will Other Financial Executives Do the Same?

Who in his right mind would walk way from an eight-figure severance package? Try AIG's Robert Willumstad. Willumstad, 63, served as the chief executive officer of ailing insurance giant American International Group from June until he was replaced earlier this month. He was eligible for a severance package of $22 million, but in a Sunday e-mail to his successor, Edward Liddy, he said that he would decline the package. "I prefer not to receive severance payments while shareholders and employees have lost considerable value in their AIG shares," he wrote in an e-mail, according to a person familiar with the situation.

Given this year's turmoil in the stock and credit markets, AIG is far from the only firm to see massive drops in share value. But don't expect executives from other financial firms to follow Willumstad's example, at least not voluntarily, said Robert Reich, the former U.S. labor secretary under President Clinton and a professor of public policy at the University of California at Berkeley. "I don't think anyone should really count on CEOs voluntarily forgoing anything," Reich said. "Why should we accept a sudden conversion on the part of America's CEOs, especially financial executives who have been raking in so much money over the last decade."

But even if executives don't volunteer to have their compensation packages reduced, new federal legislation may do it for them: Some members of Congress are seeking to have limits placed on the compensation for executives of companies that participate in the $700 billion bailout plan now being crafted by the federal government. The rescue plan would allow the federal government to buy the bad assets -- namely, mortgage investments -- held by financial firms, thereby allowing the firms to free up their balance sheets and conduct other business. "We are doing this because a lack of regulation allowed the private sector to make a lot of big mistakes," Rep. Barney Frank, D-Mass., the chairman of the House Financial Services Committee, told ABC News in reference to efforts to establish compensation limits.

More ABC News: AIG CEO Rejects $22 Million Parachute; Will Others Follow?

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It ain't as bad as it looks?...

This isn't Armageddon
September 25, 2008: Yes, we're in a crisis. But is it a disaster? No

Here's what's wrong with most of what we're hearing and reading on the financial crisis: It forgets that people aren't potted plants. Whether they're Wall Street executives, homeowners in a down market, entrepreneurs facing a credit squeeze, or politicians facing re-election, people don't just sit there and allow events to beat them up. Instead, they anticipate and they respond.

I don't claim special powers to know what how today's crisis will turn out-or what the consequences will be of the actions that attempt to solve that crisis. But I know for sure that some of what we're reading and hearing doesn't reflect clear thinking. Here are three particularly important instances:

The economy: The most troubling element of what we're reading and hearing is the constant references to the Great Depression. The error is in forgetting that all real-world situations are dynamic. The Depression itself was a dynamic sequence. It wouldn't have happened if the Fed hadn't insanely tightened credit in response to the stock market crash, rather than the correct policy of easing interest rates. And it wouldn't have happened if Congress hadn't clamped down on trade through the Smoot-Hawley bill.

Those things aren't happening this time. Instead, Congress is apparently on the road to unfreezing the credit markets. More important, America is a nation of 300 million resourceful people who will find opportunities in the current situation that you and I cannot imagine. After President Bush's speech on Wednesday evening, Brian Williams on NBC called this "the worst financial disaster in more than a generation." No, it is not that. A crisis, yes; a disaster, no. Of course, it could still become one. But for now, calling it a disaster is a dramatic overreaction.

CEO pay:

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Is the market correcting itself?...

US Stock Prices Soar, Gaining Back Half of Monday's Huge Loss
30 September 2008 - Financial markets continued to see-saw world-wide Tuesday, but US markets soared on expectations that Congress will later this week approve the financial rescue legislation that failed in the House of Representatives on Monday.

The Dow Jones Industrials gained 485 points or 4.7 percent to close at 10,850. The advance was the biggest daily gain in six years, recovering more than half of Monday's huge nearly nine-percent plunge. The advance was fueled by statements from both presidential candidates saying they favored the administration's $700-billion line of credit that would allow the government to buy up the bad loans of the banking industry. President Bush also expressed optimism saying that Monday's defeat was not the end of the legislative process.

On Wall Street, trader Teddy Weisberg of Seaport Securities said the financial rescue is in the interests of all Americans. "Because what happens in the financial system basically drives our economy at every level," said Teddy Weisberg. "And if the financial system freezes up and breaks down it will have ripple effects not only throughout our economy but the world's economies."

Weisberg spoke on Marketwatch.com. Overall, the US stock market had its worst September since 2002 with the Standard and Poors Index registering a nine percent decline. In Europe stock prices fell and currencies tumbled on news that banking authorities were extending lifelines to several financial institutions. The euro, the common currency of 15 European Union nations, had its biggest daily decline against the dollar since 2001. The euro fell 2.4 percent to $1.41. The British pound was again down sharply, declining to $1.77.75. The pound was trading at $2 just three months ago. Gold lost $13 to under $881 an ounce.

VOA News - US Stock Prices Soar, Gaining Back Half of Monday's Huge Loss

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South African Economist Calls US Turmoil Crisis of Confidence
30 September 2008 : The failure of US lawmakers to pass the $700 billion financial bailout package – and the historic plunge on wall street Monday – are being watched closely around the world.

South African economist David Shapiro, acting CEO of Sasfin Securities, says this crisis is unlike any other. From Johannesburg, he spoke to VOA English to Africa Service reporter Joe De Capua about Wall Street's 777-point drop Monday. "What you have to realize is that is the biggest drop in history. In fact, the drop was greater than after 9/11. And also what you have to remember is that it's (stock market) already been under pressure. The depth that markets have fallen is quite incredible," he says.

Asked whether he was surprised by the failure Monday to approve the legislation in the House of Representatives, Shapiro says, "I was surprised because I have great respect for (Treasury Secretary Henry) Paulson. The work that he has done to try and turn things around -- he has worked tirelessly. I have a great respect for (Federal Reserve Chairman Ben) Bernanke. I think they are clever men. They understand the market that they're in. They didn't create it and what they're trying to do is to correct what's gone wrong in the past. They're almost as ashamed as everybody else is about Wall Street, but that doesn't help anybody. The thing is to try and resuscitate the global economy -- first of course, to resuscitate the US economy…. But they had warned Congress that if you don't let this package go through the consequences will be dire."

Shapiro says warnings came from elsewhere as well. "Even respectable magazines like The Economist have come out and said, look, we don't know what the perfect package is, but they say some package has to be passed. It's better to have a bad package than no package at all," he says. As for those advocating free market principles during the crisis, letting the market take its own course, Shapiro says, "It's too late for that. To get free market adjustments, for example, adjusting their accounting laws…bringing in some tax concessions and all issues around that are going to take weeks and months to push through. By which stage, I think banking lending would have frozen up and the US economy would have just ground to a halt…. We need to bring confidence again into the US economy. We need bankers to feel that they will be able to rebuild their balance sheets."

He says it's possible a bailout package could eventually yield a profit for the American taxpayer. He says as the crisis continues, investors will turn their attention to other large economies, such as India and China, for profitable ventures. Shapiro calls it a crisis of confidence. "It starts with the banks. The [Federal Reserve] has made billions of dollars available to lend. But the banks are very nervous to actually lend it out. So even though the money is available to them, they're very scared. They're protecting their balance sheets. But holding back on lending to other banks, who in turn feel the pressure and in turn start to collapse," he says.

VOA News - South African Economist Calls US Turmoil Crisis of Confidence

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Wall St. may pass on it...

Now Wall Street may shun $700bn bail-out
Sunday October 5 2008 - Fears are mounting that many Wall Street banks and financial firms will refuse to participate in the US government's $700bn bail-out package, leaving global markets and world economies in a perilous state for months to come.

'There is a growing feeling that banks ... might instead decide to tough it out,' said Thomas Caldwell, chairman and CEO of Caldwell Financial, a $1bn-plus fund manager. For the past two weeks all eyes in the market have been focused on US Congress and its attempts to pass Treasury Secretary Henry Paulson's bail-out package - a bill to allow the US government to buy up to $700bn of toxic mortgage-related assets from American banks, which would in theory free the credit markets and set the gears of global commerce spinning once more.

Last Monday, after the bill was thrown out by the House of Representatives, more than $1 trillion was wiped off the value of US stocks as the market was gripped by panic. The bill was passed on Friday afternoon, however, after the inclusion of $149bn of tax breaks and strict rules for participating banks. But Wall Street analysts, believe the addition of so many terms to the bill might deter potential participants.

One of the least attractive elements is a section designed to curb executive pay at banks that participate in the bail-out package. These include limiting stock-related pay and banning 'golden parachutes' for executives. 'I think this hodge-podge of regulations and rules will be enough to put many [chief executives] off participating,' Caldwell said. Sources close to Goldman Sachs and Merrill Lynch indicated the banks might choose not to participate in the bail-out as there is a growing view on Wall Street that the market may be bottoming out.

Analysts also believe that the mere presence of the government as buyer of last resort will be enough to get credit markets moving again, and that a large number of banks would not need to take part for the legislation to succeed. Wall Street ended its worst week in seven years with another tumble on Friday. The Dow Jones Industrial Average closed down more than 157 points on Friday at 10,325.38.

Now Wall Street may shun $700bn bail-out | Business | The Observer

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People gettin' into a cash position...

Investors drain $12B from mutual funds
December 4, 2008: Investment research firm says money flowed out of both stock and bond based mutual funds last week.

Money flowed out of mutual funds last week, erasing a spike in deposits from the week before, as market volatility continued to undermine investors' confidence. TrimTabs Investment Research said Thursday that about $12.1 billion was withdrawn from stock-based mutual funds in the week ended Dec. 3. The week before, investors had put $10.4 billion into these funds. The bulk of the exodus happened on Monday, with modest inflows occurring on the remaining days, according to Vincent Deluard, a TrimTrabs analyst. Investors pulled out $16 billion on Monday as the Dow Jones Industrial Average dropped 680 points or 7.7%.

On Monday, The National Bureau of Economic Research made official what most Americans already believed about the state of the economy - that the U.S. has been in a recession since December 2007. "Mutual fund money is performance following," Deluard said. Investors tend to pump money into mutual funds when the market advances, "when the market goes down they take their money out," he said. To that end, the $10.4 billion inflow that occurred during the previous week corresponded with a rare 5-day rally on Wall Street. It was only the second time in 17 weeks that money had flowed into mutual funds.

In addition to the drainage of stock-based mutual funds, bond funds had an outflow of $6.8 billion, versus an inflow of $7.4 billion the week before. The flight from bond funds was the "most striking feature" of this week's report, Deluard said. "People normally sell equities in a bear market and buy bonds because they are supposed to be safe and that was the case up until September," he said. But now investors are cashing out of both stock and bond funds, reflecting the market's "extreme risk aversion," Deluard said.

More Investors drain $12B from mutual funds - Dec. 4, 2008