World Markets Reports...

Lehman Brothers' filed for Chapter 11 bankruptcy on Monday, the financially distressed Merrill Lynch decided to sell-off its assets to Bank of America which may lead to a consolidation. The Lehman's bankruptcy filing has put the future of its 700 employees at it's captive unit in Powaii into uncertainty.

Lehman said that no broker-dealer subsidiaries will be included in bankruptcy filing. It added that it is exploring sale of its broker-dealer operations. It further said that it is in advanced talks with potential buyers for investment management division.

10 Wall Street banks have agreed to set up a collateralized borrowing facility, and committed to fund for USD 7 billion each. The banks are Bank of America, Barclays, Citibank, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Merrill Lynch, Morgan Stanley, and UBS. These banks have said they are committed to fund USD 7 billion each for a USD 70 billion collateralized borrowing facility.

The BPO captives of Lehman Brothers, Merrill Lynch and AIG in India had a nervous day on Monday as the parent companies went on a financial turmoil on the Wall Street in downtown Manhattan. Stocks of major Indian IT companies also went south on the BSE.

As a result :
The Federal Reserve said it had agreed to inject 70 billion dollars into financial markets amid turmoil following the bankruptcy of Wall Street giant Lehman Brothers.

The New York Fed, acting on behalf of the Washington-based Federal Reserve central bank, said it agreed to a series of so-called "repurchase agreements" to ensure market liquidity.

And The Oil Heals
Oil prices hit a low of 94.13 dollars on 16 Sep, 08, hitting seven-month lows on prospects of weaker energy demand amid a worsening global financial crisis after Lehman Brothers' bankruptcy, analysts said.


Collective sources: economic times, indian express, cnbc tv 18

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What's considered as enough money... Just a lil' bit more....
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“In this market, the person who makes money will be he who knows when to do nothing."

As expected US indices up by almost 4% ..... The stock market surges near session highs as a CNBC reporter says the government may be planning to solve the current financial turmoil using a method similar to the 1980s savings and loan crisis.
CNBC's Gasparino reports his Wall Street sources say that Treasury Secretary Paulson is talking about a Resolution Trust Corporation-type solution to the current crisis. The RTC was created during the savings and loan crisis of the 80s.
The RTC (Resolution Trust Corp) was a government-owned asset management company mandated to liquidate assets (primarily real estate and mortgages) that belonged to savings and loan associations that the Office of Thrift Supervision had declared insolvent during the savings and loan crisis of the 1980s.

What was the Savings and Loans Crisis?:
The Savings and Loans Crisis created the greatest banking collapse since the Great Depression of 1929. By 1989, over half the Savings and Loans had failed, along with the FSLIC fund that was created to insure their deposits.

Empire Savings in Texas revealed land flips and other criminal activities. Half of the failed S&L's were from Texas, pushing that state into recession. As bad land investments were auctioned off, real estate prices collapsed, office vacancy rose to 30%, and crude oil prices fell 50%.

What Caused the Savings and Loans Crisis?:

Savings and Loans were specialized banks that used low-interest, but Federally-insured, deposits in savings accounts to fund mortgages. In the 1980's, the popularity of money market accounts reduced the attractiveness of savings accounts, so the banks asked Congress to remove restrictions. In 1982, the Garn-St. Germain Depository Institutions Act was passed, which allowed S&L's to raise interest rates on deposits, make commercial and consumer loans, and removed restrictions on loan-to-value ratios. At the same time, the Federal Home Loan Bank Board regulatory staff was reduced thanks to budget cuts.
In an attempt to raise capital, banks invested in speculative real estate and commercial loans. Between 1982 and 1985, these assets increased 56%. In Texas, 40 S&L's tripled in size, some growing 100% each year.

By 1983, 35% of the country's S&L's weren't profitable, and 9% were technically bankrupt. As banks went under, the state and Federal insurance began to run out of the money needed to refund depositors.However, S&L's kept remained open, making bad loans, and the losses kept mounting.
By 1989, Congress and the president knew they needed to bail out the industry. agreed on a taxpayer-financed bailout measure known as the FIRREA provided $50 billion to close failed banks and stop further losses. It set up a new government agency called the Resolution Trust Corporation (RTC) to resell Savings and Loan assets, and use the proceeds to pay back depositors. FIRREA also changed Savings and Loan regulations to help prevent further poor investments and fraud.


So we can expect a weekend rally in asian stocks as well on Friday (19/09/2008)...

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"A market analyst is an expert who will know tomorrow why the things he predicted yesterday didn't happen today!"

IT'S THE mother of government-sponsored bailouts for global banks and financial majors reeling under the weight of bad debts and threatening to sink the world economy The current crisis was sparked by Lehman Brothers - once one of the four pillars of Wall Street - going bankrupt, while Merrill Lynch and AIG were bought over by Bank of America and others.
Already at $1 trillion (Rs 46 lakh crore) roughly the size of India's GDP - a new White House package came as a lifeline on Friday for sinking markets.

"Legislation is urgently needed to help unclog markets," said US President George W. Bush. "Government intervention is not only warranted, but essential." Bush's comments followed US treasury secretary and former Goldman Sachs chairman Henry Paulson saying lawmakers and officials were thrashing out a comprehensive bailout to restore fast-eroding investor confidence.

Markets the world over smiled again.

Russia shot up 20 per cent, China rose 9.5 per cent and, at the time of writing, Brazil was up 9 per cent.

Mirroring this, the Sensex rose 5.5 per cent, with real estate, IT and oil and gas leading the gains.

This optimism is riding the $900 billion (Rs 41.4 lakh crore) the US has pumped into the system already for damage control. DAY ON A HIGH m World markets shoot up on US financial bailout package a Sensex rises 727 points or 5.5% to close at over 14,000 a Russia rises 20%, China 10%, the US 3.3% mThe value of the total bailout package crosses $1-trillion mark Central banks in Europe, Canada and Japan pooled in another $180 billion (Rs 8.28 lakh crore) to stabilize the global financial system.

Economists said there was a liguidity problem before financial institutions and the US package would help them get around it in the short term. But it may not be enough.

"The package will have some success," said Abheek Barua, chief economist, HDFC Bank. "But to think that the crisis is over would be optimistic." It's not just the US leadership that's worried. Prime Minister Manmohan Singh took stock of the situation on Friday at a specially convened meeting of the Cabinet Committee of Economic Affairs and asked his colleagues to remain "alert".

Source HT (print edition)


As market regulators worldwide tried to tame the impact of the financial crisis by banning short selling and pumping funds into the system, most markets showed signs of recovery.
With leading US indices rallying on Thursday and investors in major Asian markets also stepping in to buy on Friday, the BSE sensex opened with a 450-point gap and continued to gain through the session to close at 14,042, up a whopping 727 points, or 5.5%. The day’s across-the-board rally added aboutRs 1.85 lakh crore to investors’ wealth with the BSE’s market capitalization now at Rs 44.75 lakh crore.
On Thursday, the US Securities and Exchange Commission banned short selling in 799 financial stocks and regulators in other markets also followed. Central banks around the world also stepped in and infused money into the system. However, not many in India believe such steps are good for the long-term health of the market.
In India, two recent decisions by the RBI have the potential to infuse about Rs 84,000 crore into the system, and this has also helped sentiment in the local market, dealers said.
For one, the RBI has decided to go in for two LAFs (liquidity adjustment facilities) every day, instead of one earlier. LAFs are measures that the RBI takes to manage the liquidity in the system and in the present circumstances, through two LAFs per day the RBI would try to ease the dried up liquidity in the banking system. The second measure is that of reducing the SLR (statutory liquidity ratio) to 24% from 25% earlier.
Meanwhile, reacting to the ban on short selling in financial stocks in the US and the decision of central banks to pump in money into the system, Religare Securities president (equities) Amitabh Chakraborty said, “It’s more like a desperate move by the regulators. It’s not a permanent solution. I believe the steps will help prolong the pain in the market.’’ According to a dealer at a bank-sponsored brokerage, these governments are behaving irresponsibly by doling out taxpayers’ money to bail out those who had acted intemperately for a number of years.
THE SLIDE SNAPPED
The US Securities and Exchange Commission and the UK market regulator have banned short selling in financial stocks and many central banks have pumped funds into the system
The sensex rally sees investors’ wealth rising by Rs 1.85 lakh crore while the BSE market cap hits Rs 44.75 lakh crore
RBI’s decision to go in for 2 liquidity adjustment facilities every day and to reduce the statutory liquidity ratio to 24% could infuse Rs 85,000 crore into the system FIIs pump Rs 1,000cr into mkt
Mumbai: The RBI’s decision to reduce the SLR (statutory liquidity ratio) to 24% from 25% has been touted as one of the reasons for the sensex’s rise on Friday. SLR is the percentage of liquid cash banks keep with the central bank. Cutting SLR means banks get to keep more funds with themselves to meet their liquidity needs.
According to the head of a local financial house, the RBI’s decisions have come at a time when Indian banks—PSU and private ones—are not very willing to deal with the foreign banks in the country. As a result, call money rates had risen to 16% from about 6-8% about ten days ago. Although the RBI’s decision helped ease the situation in the call money market only marginally with rates dipping to about the 15% level, market players said it hadhelped improve the sentiment in the stock market.
Other than this, brokers and dealers said select foreign funds were buyers in the market on Friday. This was confirmed by the end-of-the-day (provisional) data from the BSE showing a net FII inflow of over Rs 1,000 crore. Interestingly, although local funds continued to be net buyers, the inflow figure was just Rs 44 crore. Apart from the FII buying, short covering also helped the rally, dealers said. And just as in any other rally in a bear market, the market players were out with their own nomenclatures for the rally—like a ‘technical bounceback’ for a market which was oversold, or a ‘dead cat bounce’.
Despite the rally that in two sessions recovered nearly 800 points of the 1,700 points lost in the previous seven consecutive sessions, there was lack of enthusiasm among market players. “Not many were willing to take a bet that the rally could be sustained. After all, they remember how badly most stocks were battered during the last ten days,’’ said a chief dealer at a local brokerage.
“On the contrary, there were investors willing to sell today. But looking at the strong rally, they decided not to and will probably come back on Monday,’’ the dealer added. On Friday, the rally was helped by buying in stocks from real estate, IT, oil & gas, power and banking.

Source : TOI (Print Edition)

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"A market analyst is an expert who will know tomorrow why the things he predicted yesterday didn't happen today!"

US reeled under the news of the biggest bank failure in its history, as federal regulators seized the largest American savings and loan institution, Washington Mutual (WaMu), and brokered an emergency sale of its assets to JPMorgan Chase for $1.9bn.
Global markets promptly plunged. India wasn’t spared, with the sensex losing 445 points to close at an over twomonth low of 13,102. Demand for the dollar also pummelled the rupee further down to 46.49 from the previous close of 46.03 as FII outflows for the year neared the $9bn mark.

JPMorgan Chase acquired banking assets of Washington Mutual (WaMu) after the troubled bank was seized by federal regulators

With assets worth $307 bn, WaMu was the largest savings & loan and sixth largest US bank, behind Bank of America, JPMorgan, Wachovia, Wells Fargo and Citibank

WaMu’s seizure marks biggest bank failure in US history. Previous largest failure was Continental Illinois, which had about $40bn in assets when it failed in May 1984

JPMorgan will now have about $900bn in deposits, making it the largest US bank. It will acquire all the banking operations of WaMu, including $307bn in assets and $188bn in deposits. It won’t acquire WaMu’s liabilities, including claims by shareholders. WaMu’s stock and debt holders are effectively wiped out

In return, JPMorgan will pay $1.9bn to the US Federal Deposit Insurance Corporation

WaMu’s board was completely in the dark. CEO Alan H Fishman was flying from New York to Seattle when the deal was brokered

This is JPMorgan’s second major purchase this year following the mid-March acquisition of investment bank Bear Stearns, also engineered by the govt. In March, WaMu had rejected a takeover offer from JPMorgan at $8 a share. The company collapsed as its credit rating was slashed to junk and its stock price tumbled 95% in the past year to 45 cents on Thursday. Facing $19bn of losses on soured mortgage loans, the lender put itself up for sale last week

Customers of WaMu withdrew $16.7bn from accounts since Sept 16

JPMorgan buys WaMu assets

On Friday, more bad news came from the US to dampen investors’ sentiment and dampen markets.
Latest figures revealed that US economy expanded more slowly than previously estimated in Q2. The annual rate of 2.8% was down from a preliminary estimate of 3.3% issued last month, the US commerce department announced. And the world’s largest economy grew at just 0.9% in the first quarter.
Central bankers rushed to provide more liquidity, but the markets weren’t soothed, specially after learning the fate of WaMu. With assets worth $307 billion, it represents by far the biggest bank failure in US history, eclipsing the 1984 failure of Continental Illinois National Bank and Trust in Chicago, which had assets worth barely $40 billion. JPMorgan, which acquired Bear Stearns only six months ago in another shotgun deal brokered by the government, will take control of all of WaMu’s deposits and bank branches, creating the largest bank in the US. The bank also plans to raise an additional $8 billion by issuing common stock on Friday to pay for the deal.
Federal regulators had been trying to broker a deal for WaMu because a takeover by the Federal Deposit Insurance Corporation, which insures small account-holders, would have dealt FDIC a crushing blow. The fund, which stood at $45.2 billion at the end of June, has been severely depleted after suffering a loss from the sudden collapse of IndyMac Bank. Analysts say a failure of WaMu could have cost it more than $30 billion.
For weeks, Fed and the Treasury Department had pressed hard for the bank to sell itself. WaMu publicly insisted that it could remain independent, but the giant thrift had quietly hired Goldman Sachs about two weeks ago to identify potential bidders.
But as panic gripped financial markets last week after the collapse of Lehman, WaMu customers started withdrawing their deposits, pulling out $16.7 billion since September 16. Government then stepped up its efforts, occasionally going behind WaMu’s back to work privately with four potential bidders on a deal.
On Wednesday, government solicited formal written bids. On Thursday morning, regulators notified James Dimon, chairman and CEO of JPMorgan Chase, that he was likely winner. Seizure and deal with JPMorgan came as a shock to WaMu’s board; company’s new CEO, Alan H Fishman, was in midair, flying from New York to Seattle at time deal was.

Source(s): News Print Edition(s)

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"A market analyst is an expert who will know tomorrow why the things he predicted yesterday didn't happen today!"

The stock market posted is worst one-day percent decline in 21 years after the House of Representatives rejected the $700 billion financial relief plan.

Dowjones is down about 6.71% or 748.21pts ........

Stocks were down 3.5% at 1:30 PM ET on news that Wachovia (WB 1.84, -8.16) sold its banking operations at fire-sale prices, reports that several European financial institutions had to be bailed out and concerns that the changes made to the financial relief plan over the weekend would limit financial firm participation.

The S&P 500 then plummeted to a loss of 8.8% after the House of Representatives rejected the Emergency Economic Stabilization Act by a vote of 228 against it to 205 for it. A total of 218 votes were needed to pass. The act was expected to pass, so the stock market's reaction was decidedly negative on the fear that the economy will suffer if credit markets do not improve.

Presumably, Congress will work toward a new plan to ease the financial market turmoil, although it is not clear how long it might take.

To be sure, credit markets remain tight. The TED Spread -- the difference between what banks charge each other for 3-month dollar loans (3-month Libor) and what the U.S. government pays for 3-month loans (3-month T-bill) -- rose 63 basis points to 3.55%. This is the highest level since at least 1984 and indicates that banks are reluctant to lend to each other.

With regard to Wachovia, Citigroup (C 18.98, -1.17) will pay Wachovia roughly $2.2 billion in stock (worth roughly $1 per WB share) for more than $700 billion of Wachovia's banking operation assets and related liabilities in an FDIC-facilitated transaction. Citi will raise $10 billion in a common stock offering and cut is dividend by 50% to help absorb the acquisition. Wachovia will continue to own brokerage AG Edwards and invesment managment firm Evergreen Investments.

Overseas markets also tumbled, with clear signs that the global financial system is strained. Three European governments bailed out Belgian bank Fortis, the U.K. nationalized mortgage lender Bradford & Bingley and Germany's Hypo Real Estate Holding was rescued by a consortium, according to The Wall Street Journal.

To help improve dollar liquidity, the Fed coordinated with nine central banks across the globe to more than double their swap authorization limits to $620 billion. In addition, the Fed is increasing the size of its Term Auction Facilities. The moves gave a modest improvement to credit markets, only to be overshadowed by the rejection of the financial relief plan.

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"A market analyst is an expert who will know tomorrow why the things he predicted yesterday didn't happen today!"

date 10/01/08 time 8.02 am

Hi All,
the financial system has come to a standstill, nothing is moving. The libor is at 6.88%. this is like our banks charging us 36 percent for a yearly loan on our rs 10000 washing machine.

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sinn fien

Neeraj B


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MY BLOG:
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Though the U.S. Senate passed its version of the $700 billion asset purchase plan, there is still uncertainty whether the plan will win approval from the House. The Senate's version of the plan comes with several changes, including increased FDIC insurance on bank deposits and relief from the alternative minimum tax.
Also of regulatory concern, the Securities Exchange Commission extended its ban on short selling certain stocks through October 17. Should the financial relief plan pass, the ban will expire three business days after its enactment.
Economic data did little to lift investors' spirits. Jobless claims for the week ending September 27 increased 1,000 to 497,000, which is more than the 475,000 claims that were expected. The numbers have been increasing in recent weeks, partly due to hurricane-related damages. The four-week moving average increased to 474,000 from 462,500. Claims remain at an elevated level, reflected further with the jump in continuing clams to 3.591 million from 3.543 million in the prior week.

US Stocks remain hamstringed by uncertainty whether the House of Representatives will approval of a plan to purchase distressed assets from financial institutions.

Economic reports released on Thursday morning added to the gloom. Jobless claims rose slightly last week, according to the Labor Department, and investors are bracing for Friday’s employment report for September. Economists are already pessimistic: they expect that employers shed 100,000 jobs last month and that the unemployment rate ticked up above 6 percent.

In addition, orders to American factories declined by the largest amount in nearly two years in August as credit strains began to hit manufacturing with full force. The Commerce Department reported that orders for manufactured goods dropped 4 percent in August, compared with July.Oil prices tumbled declined for a second day with crude for November delivery falling $3.73 to $94.80 a barrel.

European stocks, which had been higher before trading began in New York, reversed those gains and dropped sharply. London’s FTSE-100 index was off 1.5 percent, and the German DAX fell nearly 3 percent.

Investors are concerned that legislation will not be enough to help American financial institutions with their heavy losses, or to prevent the United States economy from slowing significantly....

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"A market analyst is an expert who will know tomorrow why the things he predicted yesterday didn't happen today!"

Date 10/04/08 time 2.05 pm

Hi All,
u know age old wisdom says that "good medicine is always bitter". This bailout package and stuff like that is firefighting in times of a mountain fire. It will simply not work. The fire engines r not equipped for mountain fires they r meant for household fires. This is a mountain fire, bitter decisions and a lot of