A respected economist and editor, Eric Le Boucher, said Thursday that “it’s frustrating for Europeans to think they are paying for the excesses of the American financial system,” Mistral noted. “If someone as calm as that is saying it, I think many others are thinking it.”
Prime Minister François Fillon, calling on Washington to act, said Thursday that “we’re not going to accept to pay for the broken dishes of a failed regulation” and a “corruption of capitalism.”
“Corruption hurts the poor disproportionatelyby diverting funds intended for development, undermining a government’s ability to provide basic services, feeding inequality and injustice, and discouraging foreign investment and aid”.
Kofi Annan, United Nations Secretary-General
in his statement on the adoption by the General Assembly of the United Nations Convention against Corruption
The Global Programme against Corruption
Corruption undermines democratic institutions, retards economic development and contributes to government instability. Corruption attacks the foundation of democratic institutions by distorting electoral processes, perverting the rule of law, and creating bureaucratic quagmires whose only reason for existence is the soliciting of bribes. Economic development is stunted because outside direct investment is discouraged and small businesses within the country often find it impossible to overcome the “start-up costs” required because of corruption.
There is info about Paulson knowing this problem needed to be resolved before June 22, 2007 which can be found at fincen – Secretary Henry M. Paulson, Jr. visited FinCEN on June 22, 2007 to launch the first regulatory efficiency and effectiveness initiatives (which addressed the unregulated and unsecured exotic, leveraged credit default swap instruments and derivatives. He could’ve made the move to illegalize and nullify them then. The economic stability forum of the IMF had warned of the critical nature of our off balance sheet accounting practices and others – but were especially adamant about making the changes last year and they didn’t.
Under the first of four initiatives announced by Secretary Paulson FinCEN is commencing a joint effort with the federal bank regulators to ensure that financial institutions and regulators treat compliance obligations in a manner that helps to avoid expenditures that are not commensurate with actual risk
Secretary Henry M. Paulson, Jr. visited FinCEN on June 22, 2007 to launch the first regulatory efficiency and effectiveness initiatives. Prior to the launch, the Secretary was briefed on certain aspects of FinCEN’s analytical capabilities, including its recent Mortgage Fraud, and Domestic Shell Company reports. He also received a detailed briefing from FBI counterterrorism officials concerning their use of the BSA information and the wealth of investigatory value that they find in CTR and SAR filings.
Representatives from trade groups representing thousands of financial services providers also received similar briefings from FinCEN and the FBI. Senior executives from the American Bankers Association, America’s Community Bankers, Credit Union National Association, Financial Services Roundtable, Independent Community Bankers of America, Institute of International Bankers, National Association of Federal Credit Unions, National Money Transmitters Association, and The Clearing House Association attended. After those briefings, the Secretary joined the trade group representatives for a discussion of the initiatives.
Other federal regulatory agencies including the Office of Thrift Supervision, the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the National Credit Union Administration and the Internal Revenue Service sent representatives to attend the Secretary’s announcement and provided their support to FinCEN’s initiatives.
World gripped by largest financial crisis in 100 years
09/17/2008 [article] / Business / Finance
The former head of the US Reserve System, Alan Greenspan, described the current financial crisis as an even that occurs once in 100 years. Indeed, the world has not witnessed such a massive financial collapse for a very long time already. The bankruptcy of Lehman Brothers will become the largest bankruptcy in the corporate history of the United States. USA’s largest insurance company, AIG, also stands on the brink of collapse. The market remains in a state of shock, being unable to realize and cope with all consequences of the recent events
Last Updated: Saturday, September 20, 2008, 18:39
British Prime Minister Gordon Brown said today he was pushing the United States to help get $8 billion from the failed US investment bank Lehman Brothers to its staff in Britain.
Administrators winding up Lehman’s European business have questioned why $8 billion was transferred to New York just before the bank collapsed.
Mr Brown also said he would visit the United States on Wednesday to meet financiers and global authorities to discuss the turmoil in financial markets. He will also speak with the French, German, Italian and Indian governments to build support for an international financial watchdog.
© 2008 irishtimes.com
Sue Them, Jail Them, Make Them Pay for Meltdown: Ann Woolner
Commentary by Ann Woolner
Sept. 19 (Bloomberg) — As it stands, the rest of us will be paying much money over a long time for the greed and bad judgment of those who melted down the economy.
Hundreds of billions of taxpayer dollars are propping up firms that a relative few money lenders and Wall Street wizards ruined.
[ . . .]
Well, what about government regulators? The U.S. Securities and Exchange Commission didn’t do anything to prevent this meltdown. But at least, with New York Attorney General Andrew Cuomo leading the charge, federal and state regulators have forced investment banks to buy back billions of dollars worth of auction-rate securities said to have been sold under dubious claims of reliability.
Consumer Price Index from French Treasury
06-08 for Japan, UK, US, Euro, France
very clear accurate chart, easy to use comparison of consumer prices in these countries – and yes, everyone else is paying less to get things than we do in the United States.
‘Tent Cities’ Spring Up In The US
3:10pm UK, Friday September 19, 2008
Communities of homeless people living in tents are cropping up across the US as the effects of rising unemployment, repossessions and the credit crunch bite. (with photos.)
France worries about getting splattered with U.S. economic ‘toxic waste’
By Steven Erlanger
Published: September 19, 2008
Sarkozy has announced a major speech on the economy for Thursday, but his aides don’t yet know what he is going to say.
The idea is to reassure the French and defend his policies, “to put into perspective the political economy of France,” said one Sarkozy aide. But first, Sarkozy was to go to New York this weekend, hoping to meet with Treasury Secretary Henry Paulson Jr. and the director of the International Monetary Fund, Dominique Strauss-Kahn of France.
Elie Cohen, director of research at the Center for Political Research at the Paris Institute of Political Studies and a member of the government’s Council of Economic Advisers, was more blunt.
“There’s certainly an idea that the American financial system has gone crazy,” he said in an interview. “This has dealt a mortal blow to the timid admiration we had of the American system. But not even the most conservative French person is capable of defending it anymore.”
“The Americans have the courage of doing a healthy purge, nationalizing when necessary,” he said in a column published Friday in Le Monde. But then he added: “This shows the limits of the ideology of financial liberalism and the need for pragmatic intervention.”But growth has already been dropping all over Europe. On Sept. 10, the European Commission forecast a recession in Germany, Spain and Britain, with France and Italy barely doing better. The commission steeply revised growth estimates downward even before the latest round of bank and insurance meltdowns.
September 15, 2008
A Year of Heavy Losses
A year ago, financial companies were flying high. But as problems in the mortgage and credit markets have grown, the stocks of many Wall Street firms have been hard hit. Some of the biggest companies have been bought out, taken over by the government or gone bankrupt.
*** Wonderful interactive chart describing the losses in blocks by company and comparison from Oct 07 – Sept 12, 08
Democratic Senators Christopher Dodd and Charles Schumer have said the Federal Reserve, which is getting $200 billion in special funding from the Treasury this month, has the authority to take on a broader role.The Fed’s role expanded further when the central bank agreed on Sept. 14 to accept a broader range of collateral, including equity, in exchange for loans to investment banks. The central bank today said loans to securities firms soared to a record $59.8 billion yesterday.
At the Fed’s request, the Treasury yesterday instituted a supplemental funding program for the central bank allowing it to expand its balance sheet. The Treasury has announced a total of $200 billion of bill auctions so far under the program.
Paulson Engineers U.S. Takeover of Fannie, Freddie (Update4)
Fannie’s market capitalization is now $7.6 billion, down from $38.9 billion at the end of last year. Freddie’s has fallen to $3.3 billion, from $22 billion over the same period.
Bernanke participated in the meetings because the central bank was given a consultative role in overseeing Fannie’s and Freddie’s capital under legislation approved in July.
To contact the reporter on this story: Rebecca Christie in Washington at Rchristie4@bloomberg.net; Dawn Kopecki in Washington at email@example.com
Last Updated: September 7, 2008 17:23 EDT
Fri. Sept. 19 2008 | 8:32 PM[09:43]
By Reuters | 21 Sep 2008 | 04:47 PM ET
WALL STREET IN CRISIS – A CNBC SPECIAL REPORT
The move comes close on the heels of an $85 billion Federal Reserve rescue of American International Group [AIG 3.85 1.16 (+43.12%) ] and the Treasury’s takeover of housing finance firms Fannie Mae [FNM 0.69 — UNCH (0) ] and Freddie Mac [FRE 0.55 — UNCH (0) ].
The Treasury plan, which follows a new federal guarantee for money market fund holdings, would push Washington’s potential bailout tab to $1.8 trillion.
Credit Crunch Timeline
Hasty takeovers, government bailouts, bankruptcy filings, CEO ousters and lots of interest rate cuts. Click ahead for the big events of the big bust.
Largest US Bankruptcies
Lehman Brothers’ bankruptcy protection filing is the largest in history, dwarfing all others. Take a look at the ten biggest corporate filings in US bankruptcy court.
Bank Failures of 2008
Take a look at this year’s bank failures (in chronological order), as measured by total assets and the cost to the FDIC’s deposit insurance fund.
Two board members of a German state-owned bank were suspended over the loss of more than $760 million because of risky deals with ailing Lehman Brothers.
(Looks like someone in Wall Street pulled a fast one on this – there was $500 million transferred the day Lehman went into bankruptcy. – my comments.)
International Financial Stability Forum and their suggestions listed by publication and date – (2006 – 2008).
The US refused to do any thing about it, but they knew what could be caused including total collapse. 2006 – 2008
How AIG fell apart
Thu Sep 18, 2008 1:55pm EDT
By Adam Davidson
Explanation of the credit default swaps in a clear manner –
At first glance, a credit default swap seems like a perfectly sensible financial tool. It is, basically, insurance on bonds. Imagine a large bank buys some bonds issued by General Electric. The bank expects to receive a steady stream of payments from GE over the years. That’s how bonds work: The issuer pays the bondholder some money every six months. But the bank figures there’s a chance that GE might go bankrupt. It’s a small chance, but not zero, and if it happens, the bank doesn’t get any more of those payments.
The bank might decide to buy a CDS, a sort of insurance policy. If GE never goes bankrupt, the bank is out whatever premium it paid for the CDS. If GE goes bankrupt and stops paying its bondholders, the bank gets money from whoever sold the CDS.
It’s easy to see the attraction. Historically, bond issuers almost never go bankrupt. So, many banks and hedge funds figured they could make a fortune by selling CDSs, keeping the premium, and almost never having to pay out anything.
You get money from other banks, and all you have to give is the promise to pay if something bad happens. That’s zero money down and a profit limited only by how many you can sell.
Over the past few years, CDSs helped transform bond trading into a highly leveraged, high-velocity business. Banks and hedge funds found that it was much easier and quicker to just buy and sell CDS contracts rather than buy and sell actual bonds. As of the end of 2007, they had grown to roughly $60 trillion in global business.
[. . .]
Credit default swaps written by AIG cover more than $440 billion in bonds 2. We learned this week that AIG has nowhere near enough money to cover all of those. Their customers-those banks and hedge funds buying CDSs-started getting nervous. So did government regulators. They started to wonder if AIG has enough money to pay out all the CDS claims it will likely owe.
Buffett’s “time bomb” goes off on Wall Street
Thu Sep 18, 2008 1:42pm EDT
By James B. Kelleher – Analysis
The latest victim is insurer AIG, which received an emergency $85 billion loan from the U.S. Federal Reserve late on Tuesday to stave off a bankruptcy.
Over the last three quarters, AIG suffered $18 billion of losses tied to guarantees it wrote on mortgage-linked derivatives.
Its struggles intensified in recent weeks as losses in its own investments led to cuts in its credit ratings. Those cuts triggered clauses in the policies AIG had written that forced it to put up billions of dollars in extra collateral — billions it did not have and could not raise.
An over-the-counter market grew up and some of the most active players became asset managers, including hedge fund managers, who bought and sold the policies like any other investment.
And in those deals, they sold protection as often as they bought it — although they rarely set aside the reserves they would need if the obligation ever had to be paid.
In one notorious case, a small hedge fund agreed to insure UBS AG (UBSN.VX: Quote, Profile, Research, Stock Buzz), the Swiss banking giant, from losses related to defaults on $1.3 billion of subprime mortgages for an annual premium of about $2 million.
The trouble was, the hedge fund set up a subsidiary to stand behind the guarantee — and capitalized it with just $4.6 million. As long as the loans performed, the fund made a killing, raking in an annualized return of nearly 44 percent.
Collected and excerpted information – by Cricket Diane