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  • Wed, Sep 17 2008
  • 1:21 PM » Treasury moves to fund Fed
    Published Wed, Sep 17 2008 1:21 PM by
    Just a not-so-subtle reminder that even for the Fed, there are costs to be borne of building a bail-out nation: The Treasury Department announced Wednesday that it would provide cash to the Federal Reserve through a new auction program to fund the central bank’s operations to provide liquidity to financial markets. In a statement, Treasury said it [...]
    Click Here to Read the Full Article

  • 11:14 AM » Goldman, Morgan Stanley See CDS Spreads Widen
    Published Wed, Sep 17 2008 11:14 AM by
    Uh-oh. For those that believe CDS markets are soothsayers for financial futures, movement in both Goldman and Morgan Stanley Wednesday is well-worth paying attention to. Per Reuters: Five-year credit default swaps on Morgan Stanley rose by 40 basis points to 796 basis points, or $796,000 a year to protect $10 million of debt, while Goldman’s swaps [...]
    Click Here to Read the Full Article

  • 10:59 AM » Morgan Stanley Profits Down, Ponders Independence
    Published Wed, Sep 17 2008 10:59 AM by
    Third quarter results at Morgan Stanley (MS: 24.03 -16.27%) — one of only two independent investment banks left, after the collapse of many previous competitors — were down but clearly far from horrible. On Tuesday, the Wall Street firm reported a better-than-expected 7.7 drop in profits, as net revenues rose; the company recorded a profit [...]
    Click Here to Read the Full Article

  • 10:44 AM » Fear Ascendant…..Again
    Published Wed, Sep 17 2008 10:44 AM by
    Fear is ascendant once again in the short markets. In the comment section of an earlier posting, friend of the blog Full Carry noted that the October 16 T bill traded at negative 1 basis point for cash settlement. The 3 month Tbill rate has declined 45 basis points and the 6 month T bill rate has declined 25 basis points. In repo, Tbills are trading at 0 as in zero. Treasury general collateral, which generally trades close to the funds rate is trading at 25 basis points. T bills and specials are trading near zero. This is all in response to the news that the Reserve fund broke the buck.
    Click Here to Read the Full Article

  • 10:44 AM » The new vulture investors -- the Fed: They'll loan up to $85 billion to AIG and will also get a 79.9% equity interest
    Published Wed, Sep 17 2008 10:44 AM by
    Not only is the up to 24 month loan collateralized and getting interest at 3 month Libor + 850 basis points, but the Fed gets a 79.9% equity interest. Those kind of terms imply that the equity is pretty under...
    Click Here to Read the Full Article

  • 10:44 AM » Hank Greenberg on possible AIG loan
    Published Wed, Sep 17 2008 10:44 AM by
    HTML clipboard Former CEO Maurice ``Hank'' Greenberg said the company needs a bridge loan rather than conservatorship, which could put the company under government control. ``Why would you want to wipe out shareholders when you just need a bridge loan?''...
    Click Here to Read the Full Article

  • 10:26 AM » AIG Heads Into Government Hands
    Published Wed, Sep 17 2008 10:26 AM by
    The reinvention of the U.S. financial landscape continued Tuesday night and Wednesday morning, with the U.S. government seizing control of its third large financial corporation Tuesday evening. The Federal Reserve announced Tuesday evening that it had, for all intents and purposes, taken over ailing insurer American International Group (AIG: 2.25 -40.00%) — after earlier refusing [...]
    Click Here to Read the Full Article

  • 10:25 AM » The Housing Slump Rolls On
    Published Wed, Sep 17 2008 10:25 AM by Seeking Alpha
    submits: A bit of good news on the real estate front would be ideal right about now. Alas, today's updates on the housing market are once more disappointing. Housing starts for August posted another hefty decline, The 6.2% drop in annualized starts last month vs. July isn't the biggest decline on record, but it's still hefty. More troubling is the fact that the declines just keep coming, as our chart below shows. Starts are now at a 17-1/2-year low.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 9:45 AM » Morgan Stanley slips, funding concern trumps earnings
    Published Wed, Sep 17 2008 9:45 AM by Market Watch
    Morgan Stanley shares fell more than 15% in pre-open trade Wednesday as investor concerns about slowing business and possible capital needs trumped a better than expected earnings report.
  • 9:44 AM » Subprime Today: AIG latest financial giant in Fed rescue
    Published Wed, Sep 17 2008 9:44 AM by Market Watch
    The latest cat-and-mouse game between markets and the government came to an end Tuesday when the U.S. took over control of insurance giant American International Group Inc. in an $85 billion bailout.
  • 9:43 AM » Pimco's El-Erian: AIG Deal "Not a Huge Help"
    Published Wed, Sep 17 2008 9:43 AM by CNBC
  • 9:42 AM » Single Family Starts: Lowest Since 1991
    Published Wed, Sep 17 2008 9:42 AM by Calculated Risk Blog
    Single-family starts were at 630 thousand in August; the lowest level since January 1991. Single-family permits were at 554 thousand in August, suggesting single family starts will fall even further next month. Click on graph for larger image in new window. The graph shows total housing starts vs. single family housing starts. Note that the current recession on the graph is not official.
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 9:41 AM » Report: Regulators Looking for a Buyer for WaMu
    Published Wed, Sep 17 2008 9:41 AM by Calculated Risk Blog
    The NY Post reports: Feds Try to Find a Buyer for WaMu The fate of Washington Mutual remained in question yesterday as federal regulators recently called a number of banks asking if they would consider buying the nation's largest savings and loan should it eventually falter, sources told The Post. In recent days, federal banking regulators have reached out to Wells Fargo, JPMorgan Chase, HSBC
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 9:40 AM » The AIG Rescue: Can Bailout Capitalism Work?
    Published Wed, Sep 17 2008 9:40 AM by Seeking Alpha
    submits: So much for the end of the , according to preliminary reports the Fed is going to rescue AIG (AIG) with a $85 Billion loan. From the WSJ:
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 9:39 AM » All Shoes May Drop for the Banks
    Published Wed, Sep 17 2008 9:39 AM by Seeking Alpha
    Jason Lindt submits: With Lehman (LEH) in Chapter 11, AIG (AIG) just downgraded three notches by S&P and potentially following Lehman's fate in the near future, who else will be the victim of this financial tempest? If the Bernanke & Paulson team continues the policy of trying to patch the holes without addressing the actual problem, unfortunately the answer will be everyone, although some will suffer earlier than others. First we are going to see more pain among the major banks driven by further writedowns. Mark to market has been the main source of trouble so far and it will continue to occupy the main seat for the next several months. There are three things in play here:
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 9:38 AM » More Bank Failures are Coming
    Published Wed, Sep 17 2008 9:38 AM by
    by Hans Wagner. "To beat the market it pays to understand the fundamental factors that are holding investors attention. Last week-end The US government took control of the two Government Sponsored Enterprises Fannie Mae and Freddie Mac to keep them from failing."
    Click Here to Read the Full Article

  • 9:37 AM » Don't Worry, The Banking System Is Sound
    Published Wed, Sep 17 2008 9:37 AM by
    Dateline July 21, 2008 "Our banking system is a safe and a sound one." Dateline September 16, 2008 The American people can remain confident in the "soundness and resilience in the American financial system." Dateline September 17, 2008 " Don't Worry, The Banking System Is Sound ". In the wake of the Fannie Mae, Freddie Mac, and AIG bailouts, Paulson was flooded with calls. Reporter Keith Taylor captured the following stunning image of Paulson answering questions from China, Japan, German, Australia, New Zealand, Canada, Great Britain, India, France, Sweden, Russia, and Iceland about the soundness of the US banking system. click on image for enhanced view Unfortunately I do not have an audio transcript, but Keith Taylor assures me that Paulson answered every call the same way: " Don't Worry, The Banking System Is Sound ". Congratulations to Keith Taylor for solid reporting that the mainstream media somehow missed. However, when it comes to the soundness of the financial system, inquiring minds wishing for a second opinion should consider Please add the $200 billion taxpayer bailout of Fannie Mae (FNM) and Freddie Mac (FRE) to the list. Also add the $85 billion bailout of insurance company American International Group (AIG). Inquiring minds may also wish to consider other Keith Taylor media scoops such as and . Mike "Mish" Shedlock Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Visit to learn more about wealth management for investors seeking strong performance with low volatility.
    Click Here to Read the Full Article

  • 9:37 AM » AIG Bailout: Fed Loophole 13.3
    Published Wed, Sep 17 2008 9:37 AM by
    In light of the Fed sponsorship of AIG to the tune of $85 billion or more at taxpayer risk (See ), inquiring minds just might be asking "By what authority can the Fed lend to insurance companies?" It's a good question given that the Fed is widely thought to be authorized to lend only to banks. It turns out the Fed can lend to pizza parlors if it wants to, with a questionable interpretation of the Federal Reserve Act. Let's start by taking a look at the . The Federal Reserve Board on Tuesday, with the full support of the Treasury Department, authorized the Federal Reserve Bank of New York to lend up to $85 billion to the American International Group (AIG) under section 13(3) of the Federal Reserve Act. The secured loan has terms and conditions designed to protect the interests of the U.S. government and taxpayers. The Board determined that, in current circumstances, a disorderly failure of AIG could add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth, and materially weaker economic performance. The purpose of this liquidity facility is to assist AIG in meeting its obligations as they come due. This loan will facilitate a process under which AIG will sell certain of its businesses in an orderly manner, with the least possible disruption to the overall economy. The AIG facility has a 24-month term. Interest will accrue on the outstanding balance at a rate of three-month Libor plus 850 basis points. AIG will be permitted to draw up to $85 billion under the facility. The interests of taxpayers are protected by key terms of the loan. The loan is collateralized by all the assets of AIG, and of its primary non-regulated subsidiaries. These assets include the stock of substantially all of the regulated subsidiaries. The loan is expected to be repaid from the proceeds of the sale of the firm’s assets. The U.S. government will receive a 79.9 percent equity interest in AIG and...
    Click Here to Read the Full Article

  • 9:37 AM » Lehman Collateral Damage: Some Hedge Funds Have Assets Frozen
    Published Wed, Sep 17 2008 9:37 AM by
    The Wall Street Journal tells us that some less-than-nimble-footed hedge funds wound up not moving their prime brokerage accounts quickly enough out of Lehman to avoid having those assets frozen in the bankruptcy. Most readers will probably find it hard to work up much sympathy for these Masters of the Universe. Despite the name "prime broker", only small hedge funds have only one prime broker, Medium to bigger hedgies have two or three, some even more. So even firms caught are not completely stuck, although not being able to trade out of a position is not where anyone ever wants to be. But these guys are supposed to be the savviest investors, right? The Bear Stearns meltdown made clear that a run on a securiites firm can push it over the edge in a mere two weeks. Lehman's stock broke through $20 a month after a share offering at $28. That should have been a red flag to anyone with an ounce of self preservation to move their business elsewhere. From the: The collapse of Lehman Brothers Holdings Inc. is creating a quandary for hedge funds: Who to do business with in a tumultuous prime-brokerage industry. Late last week, many hedge funds scrambled to shift that business away from Lehman and to other so-called prime brokers, which provide trading and lending services to the funds. But some were caught up in the bank's move to file for bankruptcy protection on Monday, say lawyers and other industry specialists. As a result, they have found their holdings effectively frozen, with no indication of when they might be able to access them. Legal experts cautioned that it could be weeks or months before the mess is sorted out, leaving hedge funds unable to unwind positions at a time when many assets are falling sharply in value... The rush to get away from Lehman has involved some of the world's biggest hedge funds, including London-based hedge fund GLG Partners LP, in which Lehman owns a stake. In a statement Tuesday, GLG said it had in recent months shifted...
    Click Here to Read the Full Article

  • 7:44 AM » U.S. to Take Over AIG
    Published Wed, Sep 17 2008 7:44 AM by WSJ
    The U.S. seized control of AIG in an $85 billion deal that signaled the intensity of its concerns about the danger a collapse could pose to the financial system.
  • 7:43 AM » Lehman, Workers Score Reprieve
    Published Wed, Sep 17 2008 7:43 AM by WSJ
    Barclays will buy the U.S. investment bank and capital-markets businesses of Lehman Brothers and up to 9,000 Lehman employees will find jobs with the U.K. bank.
  • 7:42 AM » Indications: Stock futures slip after U.S. government's AIG rescue plan
    Published Wed, Sep 17 2008 7:42 AM by Market Watch
    U.S. stock futures edged lower Wednesday after two wild sessions, with the threat of an American International Group bankruptcy averted as the U.S. government seized control.
  • 7:41 AM » US Regulators Try to Find Buyer for WaMu: Report
    Published Wed, Sep 17 2008 7:41 AM by CNBC
  • 7:40 AM » How Will the Fed Fund Bailouts? 
    Published Wed, Sep 17 2008 7:40 AM by CNBC
  • 7:39 AM » AIG Bailed Out, Ex-Allstate CEO to Take Helm
    Published Wed, Sep 17 2008 7:39 AM by CNBC
    Former Allstate CEO Edward Liddy will be the new CEO of AIG, which was rescued by an $85 billion loan from the Fed, in exchange for an 79.9% stake in itself.
  • 7:38 AM » Reserve Primary Fund Drops Below $1 a Share
    Published Wed, Sep 17 2008 7:38 AM by CNBC
  • 7:38 AM » Fed Repaid JPMorgan $87 Billion for Lehman Financing
    Published Wed, Sep 17 2008 7:38 AM by CNBC
  • 7:38 AM » HBOS and Lloyds TSB in talks
    Published Wed, Sep 17 2008 7:38 AM by
    Lloyds TSB is in advanced discussions with HBOS about a takeover following the precipitous decline in shares of the UK's largest mortgage lender this week. The high-level talks are detailed and at an advanced stage, according to a person with knowledge of the banks. A deal would dramatically increase the size of Lloyds' balance sheet.
  • 4:05 AM » Merrill Lynch Takeover Will Impact Brookfield's NAV
    Published Wed, Sep 17 2008 4:05 AM by Seeking Alpha
    submits: Bank of America's (BAC) acquisition of Merrill Lynch (MER), will have a negative impact on Brookfield Properties Corp. (BPO) net asset value, according to Blackmont Capital analyst Gail Mifsud. She maintained her "buy" rating and lowered her price target on Brookfield from C$23 to C$20 after running two scenarios to gauge the impact of the takeover on Brookfield's NAV.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 3:50 AM » Las Vegas & Sacramento Housing Show Big Gains: Is Real Estate About to Surge?
    Published Wed, Sep 17 2008 3:50 AM by Seeking Alpha
    submits: Data is starting to trickle in for August housing sales on the two housing markets I have been keeping an eye on. Las Vegas and Sacramento both showed a slight decrease from July 2008 numbers but significant increases from August 2007. I follow these two markets because I am quite familiar with both and both are poster children for the excesses of the run up and subsequent crash. I believe these two markets are leading indicators for at least the regional (CA, AZ, NV) housing market. The Las Vegas market came in with a 93% year-over-year sales increase in August. Sales were off 2% from July, ending 7 straight months of increases. Available inventory continues to fall, 7% lower than 2007 and showing a 9 months supply at the current sales pace. The median sales price continues to fall with bank owned properties accounting for 2/3 of sales. The median price fell 4.5% from July to August and 30% from the previous year.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • Tue, Sep 16 2008
  • 9:40 PM » Nationalization of AIG: Treasury to get 80% stake in return for $85 billion
    Published Tue, Sep 16 2008 9:40 PM by
    Why don't we just do it all now and get it done with? Why piece by piece? Let's have the government run insurance companies, auto companies, banks, mortgage companies, home builders, brokerages, gas stations, and for good measure let's throw in pizza parlors. Here is the rumor (it's true). Bloomberg is reporting . The U.S. Treasury is considering taking over American International Group Inc. under a conservatorship as one option to address the insurer's crisis, according to two people briefed on the discussions. Executives from AIG, bankers and Treasury and Federal Reserve officials are meeting today on the company's situation at the New York Fed. A number of options are under being discussed to fill a shortfall of $75 billion to $100 billion in funding, one of the people said. The talks are continuing, he said. Goldman Sachs Group Inc. and JPMorgan Chase & Co., which have been leading efforts to find a private-sector solution, informed the Fed that such an effort would be difficult, the person said. Under another option, the Fed would extend a loan to New York-based AIG, according to a person informed of the matter. Notice how shortfalls have increased from $40 billion, to $70 billion, to $100 billion. Is there any reason for it to stop there. Two Scenarios 1) AIG has been fraudulently tapping its insurance subsidiaries 2) AIG simply screwed up its main corporate office If it's #1 there should be prosecutions, if it's #2 then AIG should be allowed to go under. The Fed can deal with the aftermath. Nowhere should taxpayers be footing the bill for stupid corporate mistakes. While typing this post futures suddenly reversed by about 20 points in a matter of minutes. Bloomberg just announced the Treasury is going to take AIG into Conservatorship. Here is the announcement. In an extraordinary turn, the Federal Reserve was close to a deal Tuesday night to take a nearly 80 percent stake in the troubled giant insurance company, the American...
    Click Here to Read the Full Article

  • 9:40 PM » Bernanke Breaks From Greenspan Fed: No Change
    Published Tue, Sep 16 2008 9:40 PM by
    The odds of a cut by the futures were 80%. I did not think it would happen. . The Federal Open Market Committee decided today to keep its target for the federal funds rate at 2 percent. Strains in financial markets have increased significantly and labor markets have weakened further. Economic growth appears to have slowed recently, partly reflecting a softening of household spending. Tight credit conditions, the ongoing housing contraction, and some slowing in export growth are likely to weigh on economic growth over the next few quarters. Over time, the substantial easing of monetary policy, combined with ongoing measures to foster market liquidity, should help to promote moderate economic growth. Inflation has been high, spurred by the earlier increases in the prices of energy and some other commodities. The Committee expects inflation to moderate later this year and next year, but the inflation outlook remains highly uncertain. The downside risks to growth and the upside risks to inflation are both of significant concern to the Committee. The Committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability. This is the first significant break in Bernanke Fed policy as compared to the Greenspan Fed. Greenspan was always willing to throw a lifeline to the markets in time of turmoil. Furthermore, the Greenspan Fed seldom went against market expectations in a major way. In terms of market expectations, however, it is important to note that most economists did not agree with expectations the futures market priced in for a cut today. Tyranny of Zero My opinion is that Bernanke is worried about the "Tyranny Of Zero" and wants to use his remaining bullets wisely. Japan reduced rates to 0% and once at zero there is nothing more that can be done. Mike "Mish" Shedlock Mike Shedlock / Mish is a registered investment advisor representative...
    Click Here to Read the Full Article

  • 9:32 PM » FASB Pushes Ahead With “Securitization Killer”
    Published Tue, Sep 16 2008 9:32 PM by
    Anyone who really understands the mortgage markets understands one very important thing: securitization largely provides the critical liquidity that makes modern mortgage lending possible, something that holds true even in the agency market. Which means that anything that fiddles with securitization has the potential fundamentally alter mortgage lending as we know it; and while we [...]
    Click Here to Read the Full Article

  • 9:11 PM » AIG gets Fed rescue in form of $85 billion loan
    Published Tue, Sep 16 2008 9:11 PM by Market Watch
    The Federal Reserve Board made the extraordinary move late Tuesday of authorizing an emergency, $85 billion loan to rescue troubled insurance giant American International Group Inc.
  • 8:09 PM » DealBook: Federal Reserve May Act Alone in Rescuing A.I.G.
    Published Tue, Sep 16 2008 8:09 PM by
    The fate of the American International Group now lies with Federal Reserve, as the likelihood of a $75 billion credit line financed by a bank syndicate appears remote.
    Click Here to Read the Full Article

  • 8:08 PM » Fed Leaves Rates Unchanged
    Published Tue, Sep 16 2008 8:08 PM by WSJ
    The Fed held interest rates steady and in a disappointment to Wall Street didn't appear to signal that rate cuts are forthcoming anytime soon.
  • 8:07 PM » Morgan Stanley Net Falls 7%
    Published Tue, Sep 16 2008 8:07 PM by WSJ
    Morgan Stanley's third-quarter net declined 7% but easily topped Wall Street expectations. Shares of the investment bank, which rushed its results out ahead of schedule, rose in after-hours trading.
  • 8:06 PM » Stocks Rebound Amid AIG Drama
    Published Tue, Sep 16 2008 8:06 PM by WSJ
    The Dow industrials gained 1.3% to 11059.02 after the Fed kept interest rates unchanged and investors grew optimistic about the fate of AIG. The insurance giant's shares swung wildly all day, ending down 21%.
  • 8:05 PM » NewsWatch: U.S. stocks rally to close higher on hopes for AIG rescue
    Published Tue, Sep 16 2008 8:05 PM by Market Watch
    U.S. stocks head into the last hour of trading in dramatic fashion, plunging after the Federal Reserve refused to cut interest rates, then leaping back on reports the government might extend a loan to embattled insurer American International Group Inc.
  • 8:04 PM » MarketWatch First Take: Good news out of the Lehman debacle
    Published Tue, Sep 16 2008 8:04 PM by Market Watch
    Wall Street can be thankful it finally saw some innovative deal-making on Tuesday -- even if it was the Brits who made it happen.
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