Important articles I don't have time to comment on....

Wednesday, September 17, 2008, 12:26 PM

Gross's Total Return Posts Biggest One-Day Drop in Three Years


Sept. 17 (Bloomberg) -- Bill Gross's Pimco Total Return Fund, the world's largest bond fund, fell 1.4 percent yesterday, the biggest one-day decline in more than three years, according to data compiled by Bloomberg.

Current account deficit widens to 5.1% of GDP


WASHINGTON (MarketWatch) - The U.S. current account deficit widened to $183.1 billion in the second quarter, or 5.1% of gross domestic product, the Commerce Department reported Wednesday. The increase in the deficit was accounted for by a decrease in the surplus on income and an increase in the deficit on goods. Net financial inflows dropped to $136.7 billion in the second quarter from $190.4 billion as acquisitions of U.S. financial assets by foreigners fell sharply. Foreign acquisitions of U.S. assets increased by $26.3 billion after $459 billion in the second quarter.

Federal bank insurance fund dwindling


The Federal Deposit Insurance Corp., whose insurance fund has slipped below the minimum target level set by Congress, could be forced to tap tax dollars through a Treasury Department loan if Washington Mutual Inc., the nation's largest thrift, or another struggling rival fails, economists and industry analysts said Tuesday.

JPMorgan Gave Lehman $138 Billion After Bankruptcy

Sept. 16 (Bloomberg) -- Lehman Brothers Holdings Inc., the securities firm that filed the biggest bankruptcy in history yesterday, was advanced $138 billion this week by JPMorgan Chase & Co. to settle Lehman trades and keep financial markets stable, according to a court filing.

One advance of $87 billion was made on Sept. 15 after the pre-dawn filing, and another of $51 billion was made the following day, according to a bankruptcy court documents posted today. Both were made to settle securities transactions with customers of Lehman and its clearance parties, the filings said.

The advances were necessary ``to avoid a disruption of the financial markets,'' Lehman said in the filing.

U.S. to Take Over AIG in $85 Billion Bailout

The U.S. government seized control of American International Group Inc. -- one of the world's biggest insurers -- in an $85 billion deal that signaled the intensity of its concerns about the danger a collapse could pose to the financial system.

The U.S. negotiators drove a hard bargain. Under terms hammered out Tuesday night, the Fed will lend up to $85 billion to AIG, and the U.S. government will effectively get a 79.9% equity stake in the insurer in the form of warrants called equity participation notes. The two-year loan will carry an interest rate of Libor plus 8.5 percentage points. (Libor, the London interbank offered rate, is a common short-term lending benchmark.)

Banks: the contagion spreads

The City's financial watchdog last night sought to shore up confidence in Britain's biggest mortgage lender, HBOS, after a 40% fall in the bank's share price following two days of market turbulence caused by the collapse of Lehman Brothers.

After a second day of sharp share falls in HBOS, the government was ready to activate longstanding contingency plans to ensure financial stability.

The Financial Services Authority, in a rare public comment on a specific bank, said: "We can confirm that, as HBOS already stated, HBOS has a strong capital base and continues to fund satisfactorily."

Russian bourses halt trading for second day

Russia’s two main bourses, RTS and MICEX, said on Wednesday they were suspending trade until further notice from the state’s main market regulator as shares continued to tumble one day after their steepest decline in more than a decade.

Russian stocks had continued to slide on Wednesday morning even as the government unveiled new anti-crisis measures to pump up to $29.5bn in extra budget funds into the three main state-controlled banks.

New Jersey Pension Fund Lost $50 Million on Lehman

Sept. 11 (Bloomberg) -- New Jersey's state pension fund lost $50 million on the sale of about 3 million shares of Lehman Brothers Holdings Inc. during the past two months, fund director William Clark said.

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joemanc's picture
Status: Martenson Brigade Member (Offline)
Joined: Aug 16 2008
Posts: 834
Someone else saw this coming
srbarbour's picture
Status: Silver Member (Offline)
Joined: Aug 23 2008
Posts: 148
I'll grant you that he foresaw the bubble. Alas, instead of seeking to solve it, he looked to remove the GSEs from adding to the damage.

I submit, that if Freddie and Fannie were in any way meeting their Federal mandate of providing 'cheap housing', they would have taken real and direct efforts to 'pop' the spiraling housing costs early on. Which would have taken all the umph! out of the bubble (For instance, Fannie and Freddie could have appraised houses dependent on construction costs, added a flat reasonable profit fee, and refused to finance any loan whose total sum was a dime above it.)

Instead, they did the exact opposite. They leveraged the rising costs for increased profit, encouraging the exploding costs and shoddy loans with unhesitating cheap financing which they knew was on the public's dime.

Remember, in the end the 'private markets' caused this bubble. While making Freddie and Fannie truly private industries might have helped, it wouldn't have done nearly as much as many are inclined to think. A true solution would have involved enforcing existing regulations, putting a stop to usury loans, and killing those ARMs intended to take advantage of foolish buyers unaware that financing was at historic lows.

Personally, there is no question in my mind that many of those 'subprime' and similarly structured loans were flat out designed to cause foreclosures. I can't imagine any banker was stupid enough to believe that resetting to a >10% annual rate would cause anything else. Instead, it seems more likely that they thought they'd pick up the payments for 2-5 years, stack on some 'penalties', and then hock off the 'recovered' house at the 'rising market price' scoring profit on both ends. I mean 'worst is worst' you get your money back and maybe a low yield, because 'everyone knows housing prices never fall' (Or at least, so everyone thought).

So, meh. An 'A+' for the foresight, A 'D+' for the 'solution'.


ike's picture
Status: Member (Offline)
Joined: Sep 17 2008
Posts: 19
gold/silver analysis
A useful article to understand the forces that have created the huge fall in gold/silver over the last few weeks. Unfortunately, it doesn't address how easily this 'parlor trick' (as the author labels it) can or may be repeated in the future.
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mark allen
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Joined: Aug 27 2015
Posts: 1
Bluefield HDMI Mini Switch Amplify 
Very solid post!  It’s helpful searching material and helps us for the working procedure. Thanks much
Bluefield HDMI Mini Switch Amplify 


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