Saturday, September 27, 2008
Friday, September 19, 2008
Radical bailout plan has a jawdropping price tag
WASHINGTON - Struggling to stave off financial catastrophe, the Bush administration on Friday laid out a radical bailout plan with a jawdropping price tag — a takeover of a half-trillion dollars or more in worthless mortgages and other bad debt held by tottering institutions.
Relieved investors sent stocks soaring on Wall Street and around the globe. The Dow-Jones industrials average rose 368 points after surging 410 points the day before on rumors the federal action was afoot.
A grim-faced President Bush acknowledged risks to taxpayers in what would be the most sweeping government intervention to rescue failing financial institutions since the Great Depression. But he declared, "The risk of not acting would be far higher."
The administration is asking Congress for far-reaching new powers to take over troubled mortgages from banks and other companies, including purchasing sour mortgage-backed securities. Administration officials and congressional leaders are to work out details over the weekend.
Congressional officials said they expected a request for legal authority to buy up the bad loans, at a cost in excess of $500 billion to the government. Democrats were discussing whether to try to attach middle class assistance to the legislation, despite a request from Bush to avoid adding controversial items that could delay action. An expansion of jobless benefits was one possibility.
In other major steps, the Treasury Department and Federal Reserve moved to give money-market mutual funds the same kind of federal protection, at least temporarily, that now applies to savings and checking accounts and certificates of deposit at banks. Money-market accounts sold through retail banks are already FDIC insured.
The spreading global selling panic had started to threaten some money-market funds, usually thought of as rock-solid investments. Administration officials feared a run on these funds, held by millions of Americans.
"Every American should know that the federal government continues to enforce laws and regulations protecting your money," Bush said at the White House. The 75-year-old Federal Deposit Insurance Corporation now insures savings and checking accounts and certificates of deposit up to $100,000.
Separately, the Securities and Exchange Commission acted to block short-selling in financial securities. That is a trading method that bets the value of stocks will go down. It has been blamed for accelerating the plunge in stock prices of banks and other financial institutions.
"This is a pivotal moment for America's economy," Bush said. "In our nation's history, there have been moments that require us to come together across party lines to address major challenges. This is such a moment."
Congressional leaders of both parties welcomed the administration's bold moves, after a series of ad hoc rescues.
The talk on the presidential campaign trail, barely six weeks before the election, was of bipartisanship, too.
Democrat Barack Obama said it was critical that leaders in both parties work in concert. "Truly, we are all in this together," he said.
GOP presidential nominee John McCain said leaders should put aside partisan differences and "any action should be designed to keep people in their homes and safeguard the life savings of all Americans."
The federal government already has pledged more than $600 billion in the past year to bail out, or help bail out, some of the biggest names in American finance. That includes the rescue of investment bank Bear Stearns in March, the takeover of mortgage giants Fannie Mae and Freddie Mac earlier this month and the takeover of the world's largest insurance company, American International Group, just this week.
But the contagion continued to spread, bringing political consensus that drastic and comprehensive federal action was needed.
There are precedents for such a federal takeover.
In the late 1980s, the government created the Resolution Trust Corporation to tackle the savings and loan crisis. It acquired the defaulted mortgages, foreclosed real estate and other assets of nearly a thousand failed S&Ls, restoring order and stability to the system. Resolving that crisis took six years and $125 billion in taxpayer money — roughly equal to $200 billion in today's dollars.
And there was the Reconstruction Finance Corporation, a Depression-era relief program formed in 1932 by President Hoover that tried to revive the market by giving loans to banks and other businesses.
On Friday, Treasury Secretary Henry Paulson gave few details about the structure of the new program. Asked about an overall price tag, he said, "hundreds of billions" of dollars.
Congressional leaders said they were ready to move quickly but still needed details of the administration plan. For instance, there was no indication of what the government would get in return from financial companies for the federal assistance.
Paulson and Federal Reserve Chairman Ben Bernanke briefed lawmakers in both parties on the idea by conference call Friday.
In a session with House Democrats, they described a plan where the government would in essence set up reverse auctions, putting up money for a class of distressed assets — such as loans that are delinquent but not in default — and financial institutions would compete for how little they would accept for the investments, said Rep. Brad Sherman, D-Calif., who participated in the call.
"You give them good cash; they give you the worst of the worst," Sherman said of the plan, which he complained that Bush and his economic advisers were trying to panic lawmakers into rubber-stamping.
Paulson rejected Democrats' calls to include tighter regulations, corporate reforms or limits on executive compensation as part of the measure, Sherman said. "He's doing his best to paint a picture of the sky falling, and then he says, because the sky's falling, you have to do it my way."
Paulson said the new troubled-asset relief program that he wants Congress to enact must be large enough to have the necessary impact while protecting taxpayers as much as possible.
"I am convinced that this bold approach will cost American families far less than the alternative — a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion," Paulson. "The financial security of all Americans ... depends on our ability to restore our financial institutions to a sound footing."
Bush said simply, "We must act now."
"America's economy is facing unprecedented challenges. We're responding with unprecedented measures," Bush declared, standing in the White House Rose Garden with Paulson, Bernanke and Christopher Cox, chairman of the Securities and Exchange Commission.
Shortly after his remarks, Bush called congressional leaders with whom the administration will be working on the final plan. He spoke to Senate Majority Leader Harry Reid, D-Nev., House Speaker Nancy Pelosi, D-Calif., Senate Republican leader Mitch McConnell of Kentucky and House GOP leader John Boehner of Ohio.
The administration wants to see a package emerge from the weekend, to lend calm to Monday morning's market openings, said Keith Hennessey, the director of the president's economic council. The goal is to have something passed by Congress by the end of next week, when lawmakers recess for the elections.
Paulson said Fannie Mae and Freddie Mac will step up their purchases of mortgage-backed securities to help provide support to the crippled housing market. He also said the Treasury Department will expand a program, announced earlier this month, to buy mortgage-backed securities, which have been badly hurt by the housing and credit crises.
"As we all know, lax lending practices earlier this decade led to irresponsible lending and irresponsible borrowing. This simply put too many families into mortgages they could not afford," Paulson said.
Bush authorized Treasury to tap up to $50 billion from a Depression-era fund to insure the holdings of eligible money-market mutual funds. And the Federal Reserve announced it would expand its emergency lending program to help support the $3.4 trillion in total assets of the funds.
On Wednesday alone, investors had pulled more than $89 billion from money-market funds, according to iMoneyNet, publisher of the newsletter Money Fund Report.
The government's actions could help alleviate the uncertainty that has been sending the markets into tumult over the past week. Lending has come to a virtual standstill in the wake of the bankruptcy of Lehman Brothers Holdings Inc.
European Central Bank, Swiss National Bank and Bank of England also offered up more cash Friday. The three banks put a combined $90 billion into money markets.
America's Surprising Foreclosure Hot Spots
The crisis on Wall Street is shrinking net worths and erasing nest eggs. Next on the block: multimillion-dollar homes.
In some of America's wealthiest spots, that's already happening. According to RealtyTrac, an Irvine, Calif.-based listing firm that tracks foreclosures and provided the data here, several of the country's wealthiest ZIP codes--where year-to-date median home sales are above $700,000--have reported foreclosures into the triple digits. They include La Jolla, Calif.; Miami Beach; and Carlsbad, Calif.
In Carlsbad, for example, there are 302 homes in foreclosure. The wealthy beach town--the median home sale price is $710,000--has suffered from overvaluation and risky financing, says Rick Sharga, a senior vice president at RealtyTrac. The only thing that separates homeowners in Carlsbad from those in spots like St. George, Utah, with 274 current foreclosures and a median home price of $218,000, and Ann Arbor, Mich., with 436 current foreclosures and a median home price sale of $225,000, is that in Carlsbad folks are losing their second homes.
In Pictures: America's Surprising Foreclosure Hotspots
"In this real estate cycle, no ZIP code, no neighborhood, was immune," says Sharga. Not only are average Americans defaulting on subprime loans, wealthier individuals who were relying on bonuses that never came through or who took out option adjustable-rate mortgages and must now face the skyrocketing monthly rates have also had to flee.
Take Lake Forest, Ill., a Midwestern town with a love for--of all things--polo. (The local country club hosts matches every weekend in August.) The fondness for the upper-echelon game is a tip-off that the brunt of Lake Forest residents aren't suffering financially. Still, many of the community's properties are vacation homes, which means that those who secured a second mortgage even though it was beyond their means are now defaulting. While the median house sale price is $873,750, the current number of foreclosures is 53.
Overvaluation is another major factor in high-end foreclosures, says Sharga. During the housing boom of the mid-aughts, buyers paid prices for homes with a huge expected appreciation cooked into the price. As prices corrected, many were saddled with mortgages, with monthly payments reflecting the former value of the home.
Speculative activity, or people betting pricey homes will always have ready buyers, is another factor. "People were leveraging the equity in their homes to speculate on other properties," says Sharga.
That's the case in Malibu, Calif., and other California spots, including Newport Beach and La Jolla. The median home sale price in Newport Beach is $1.4 million and there are 89 homes in foreclosure; in La Jolla, there are 158 foreclosures, due mostly to second-home buyers overextending themselves.
It's not just vacation towns in California taking a hit. Foreclosures have been more prevalent since the credit crunch has caused those in the New York and Philadelphia metro areas who could once afford a vacation home to default as well. On the southern part of New Jersey's Long Beach Island, Beach Haven boasts a median house sale of $722,500.
In other areas, buyers took out loans for properties that were beyond reach. This happened in Scarsdale, N.Y., just 30 minutes from Manhattan's Grand Central Terminal. This pleasant commuter town, whose Tudor-style buildings evoke an English village, currently has 57 foreclosures.
Another problem is overabundance of property. The affluent area of Scottsdale, Ariz.--a popular spot for retired snowbirds--has been affected by overbuilding in the condominium sector. That means values have dropped and speculators have no one to sell to. "Typically, when we see an abnormal surge in an otherwise stable area, homes are being overbuilt," says Sharga.
Whether because of overbuilding, overvaluation or risky financing, the current foreclosure dilemma suggests one thing: No one is truly "comfortable" right now when it comes to finances.
Thursday, September 18, 2008
If you haven't, you should...
Selected Leak Reportage
- Update: Hackers claim to break into Palin's Yahoo Mail account
- Wikileaks exposes Palin's private e-mail account
- VP contender Sarah Palin hacked
- Secret Counterfeiting Treaty Public Must be Made Public, Global Organizations Say
- DHS Report Says Leave Laptops At Home
- Feds worried terrorism fear may trigger mass psychosomatic illness
- Teile des Schafer-Berichtes auf wikileaks
- How German intelligence infiltrated Focus magazine
- East Timor: Leaked autopsy report shows alleged “coup” leader Reinado shot at point-blank range
- Dili investigator called to Canberra as evidence of execution mounts
- How ministers plotted murder
- Ministers deny violence claim
- How election violence was financed
- Revealed: Secrets of election violence
- Faculty in league table expulsion
- Leaked Contract Helps Sallie Mae and USA Funds in Court
- US Judge slams lawyer for leaks, dismisses suit
- National Security Directive on Space Exploration Policy (2004)
- Secrecy claims on copyright treaty
- Avian Flu and the World Health Organisation’s Protection Racket
- The New York Sun's Obama Frame-Up
- Jihad fantasies of Obama, Dick Morris and Kenya
- Leaked UK report damns Iraq war planning
- Iraq war was badly planned says UK Army
- Cómo entrenar a escuadrones de la muerte y aplastar revoluciones de El Salvador a Iraq
- ANC plans to ban corruption leaks
- Rechteinhaber legen Forderungspapier fuer Anti-Piraterieabkommen ACTA vor
- Government planning "insider" ACTA group
- Secret multilateral negotiations on ACTA commencing today
- Scientology's prison system
- Justice, Texas style -- read about it while you can
- Judo official resigned admist abuse allegations
- US Olympic Committee opens inquiry into judo official
- Report on Shriners raises question of wrongdoing
- Claims of molestation resurface for US judo official
- Miss Utah's how to catch and keep a Mormon husband manual
- Corruption exposed at network of 22 US and Canadian children's hospitals
- Warrentless Wiretapping Comes to Canada-Canadian Media Censored
- Framing Obama: what the Spectator and the New York Sun won't tell you
- Cuba to work around US embargo via undersea cable to Venezuela
- Leaked Contract Raises Concerns Over Guarantor's Independence from Lender
- Eutelsat suppresses independent Chinese-language TV station NTDTV to satisfy Beijing
- Trent University report leaked months ago
- Trent University's secret real estate deal
- Come addestrare squadroni della morte e annullare le rivoluzioni da San Salvador all'Iraq
- US may have sold mass surveillance gear to Chavez
- Gusmao's $15m rice deal alarms UN
- New doubts about ISO's fast-track standardisation of Microsoft OOXML
- Neue Zweifel am Schnellverfahren zur ISO-Normierung von Microsofts OOXML
- Texas Catholic hospitals did not follow Catholic ethics, report claims
- Contract Raises New Concern Over Sallie Mae's Ties to Guarantor
- Texas Bishops examine reports of ethical lapses at Catholic hospitals
- Did the Wikimedia Foundation lie about muzzling Wikinews?
- How to train death squads and quash revolutions from San Salvador to Iraq
- Catholic hospitals betray mission
- Anti-corruption whistleblowing website blocked by Kenyan Government
- Divide and conquer: McCain's plan to wrest Clintonion women from Obama?
- ACTA trade agreement negotiation lacks transparency
- Fundacja Wikimedia cenzuruje serwis Wikinews
- University staff faking survey
- Food price spike to hit EU farming review
- EU farm chief targets wealthy farmers in reform plan
- Leaked documents suggest European CAP reform just a whitewash
- Swiss private banker blows whistle on banking secrecy laws
- Universities face survey warning
- Wikimedia Foundation Board censoring Wikinews
- Der Fall Moonstone Trust
- Exbanker klagt die Schweiz an
- Mormon Church attempts to gag Internet over handbook
- Rudolf Elmer files against Swiss banking secrecy at ECHR
- Give us glowing report or get a shit degree, UK lecturers tell students
- How Britain got the bomb
- Fallujah jail challenges US
- Church of Scientology's 'Operating Thetan' documents leaked online
- One Child's Unending Abuse - From Disney World Girl to Drifter
- The Military "Leveraging" of Cultural Knowledge - lessons learned in Mosul
- Whistleblower exposes insider trading program at JP Morgan
- Ex-Rock Impresario Tony Defries lost $22 million in offshore tax evasion scheme
- Bank Julius Baer: Steuermanoever ueber die Cayman Inseln
- Bank Julius Baer: Grand Larceny via Grand Cayman
- Classified documents from Guantanamo captive's Combatant Status Review Tribunals
- Wikileaks and Internet Censorship - a comparative study
- Court gags Cayman Whistleblower
- Swiss bank obtains injunction against whistleblower site
- Clouds on the Cayman tax heaven
- Die Akten des Hurricane Man
- Camp 7 and the Torturer's Shrink
- Spokesman: U.S. forces in Iraq not entitled to chase suspects into Iran
- Tehran Warns US Forces against Chasing Suspects into Iran
- The limits of Individual morality
- War by the rules in Iraq
- Den muslimska faktorn – valfläsk och propaganda i det kenyanska valet
- Iraq rules need more airing
- US Iraq Rules of Engagement leaked
- Rules stop US entering mosques
- Cross-border clashes from Iraq O.K.
- The Monju nuclear reactor leak
- Skype and the Bavarian trojan in the middle
- An American solution to the Kenyan consitutional crisis
- Time magazine self-censors over Northern Rock
- Bank Julius Baer vs. Wikileaks
- Northern Rock vs. Wikileaks
- Journalism through the eyes of Fallujah
- Fallujah: The first Iraqi intifada
- U.S lost Fallujah's info war
- Fallujah, the information war and U.S. propaganda
- Секретный доклад о поражении американской армии в Фаллудже, Ирак
- Classified U.S report into the Fallujah assult
- The International Committee of the Red Cross and Guantánamo Bay
- Bermuda's Premier Brown and the BCC bankdraft
Fresh Leaks Needing Reportage
- Sarah Palin Yahoo account 2008
- Indian Army Doctrine-part1 2004
- Indian Army Doctrine-part2 2004
- Indian Army Doctrine-Part3 2004
- US military Civil Affairs Tactics, Techniques and Procedures FM 3-05.401 2007
- UK military Joint Operations Planning 2004
- UK Army Cadet Force Manual 2005
- UK Tactical Handbook for Operations Other Than War 1998
- UK military operations in Northern Ireland 1969-2006 aka Operation Banner
- UK Kezia Dugdale censored Hanif letter 2008
- Intel CSI specification
- US FAIRECONRON Classified Materials Handling Review 2008
- US Army Mental Health brief 2007
- US miltary: Living in a Special Classified Intelligence Facility 2008
- CIRA: Exploitation of the Chinese Internet 2007
- Lehman Brothers summer intern got USD 55,000 biweekly 2008
- Kuwait Standard Operating Procedure for Explosive Ordnance Disposal 1991
- New Jersey Progressive Collapse Design Methadology 2008
- University of Zurich Brain Research Institute evaluation 2008
- Full Kenyan post election violence report 2008
- Leighton Contractors Philippines P2324 Masbate Gold Project Audit Findings 2008
- CIA FBIS: Usama bin Laden Statements 1994-2004
- Fort Carlson Installation Guard 210-20 2005
- Censored: UK Company ThorpeGlen spies on 50 million Indonesians 2008
- Forced beard shaving and other rights violations against Azerbaijani Muslims
- US DHS: Foreign Travel Threat Assessment: Electronic Communications Vulnerabilities 2008
- US DHS: Reserve Strategic Intiatives 2005
- Schaefer report missing pages on BND contacts with journalist Josef Hufelschulte 2006
- US State funds covert Israeli linked Iran Visual News Corp aka Peyman Online 2007
- FBI: Sniper Tactics and Effects on the US Homeland 2007
- FBI: White Supremacist Recruitment of Military Personnel 2008
- Paul Bremer Iraq tinted window ban 2003
- Censored Cartleton University Campuscard fiasco 2008
- US National Air and Space Intelligence Center: Advanced Technical Exploitation Contract 2007
- US DHS: Fear of Terrorist Attack Could Trigger Mass Psychogenic Illness 2006
- Russian and US Exercise for Conducting on-site Inspections under the Comprehensive Nuclear-Test Ban Treaty 2001
- US Army CALL 4-24 SOCOM Convoy Handbook 2004
- US Criminal Intelligence Summary 30 Aug 2002
- US Criminal Intelligence Summary 16 Aug 2002
- US Criminal Intelligence Summary 3 May 2002
- Philippine Bomb Data Center Technical Intelligence Bulletin May 2005
- CIA Studies in Intelligence: The Decline of the National Reconnaissance Office 2002
- US Department of Homeland Security Bay Area allocations 2006
- US Defense Public Key Infracture Use Cases 2006
- UNMIT investigation into the shooting of East Timor President Ramos Horta 2008
- LDS Church exclusion of members access to their own records 2008
- US Defense Policy on Discussion of IED in the media 2006
- National Research Center for College University Admissions Westpoint student data sale 2007
- US Department of Homeland Security Montana plan 2008-2011
- NSA spy base expansion costs for Georgia, Hawaii and Maryland FY 2008
- Haliburton Radwaniya Palace Iraq costings 2007
- Department of Homeland Security Medical Readiness 2005
- UK MOD The Capabilties and Employment of FV430 Mk3 BULLDOG in the Mechanized Infrantry Battalion 2006
- Iraq Counter IED Smart Book 2007
- Iraqi MOD AWOL Policy 2004
- US Camp Bucca Iraq Hostage Plan 2007
- US Army Technical Manual 6A-2-1-60 Explosive Ordnance Disposal Procedures Methods of External Fuze Gagging 1989
- US National Indian Gaming Commission Comparison Analysis of Various Class II Configuration Options 2006
- US Improvized Explosive Device Newsletter 16 Aug 2004
- US Federal Labor Regulation Authority Use of Government Vehicles 2003
- US Inspector General Federal Labor Regulations Authority Human Capital Progress Assessment 2003
- USAID security audit of African Development Foundation 2007
- US Army Battle Command System 2001
- SML Strategic Media Morocco Synopsis 2008
- Operation Iraqi Freedom Third Infantry Division After Action Report Jul 2003
- Control room proposal for SBV Nigeria Feb 2008
- US Pre Combat Inspections 2004
- Freenode-Gentoo trustees conflict email 2008
- UN Staff Travel Advisory 9 April 2007
- US Fort Levenworth Control Proceedures for Intractable Inmates 2006
- South African Mining Refuge Chaimbers Report 2007
- US Treasury Strategic Direction 2009-2011
- DHS Schools: Lessons Learned 2007
- DHS Golden Guardian After Action Review 2004
- FBI Gang Related Activity in the US Armed Forces is Increasing 2007
- FBI Extremist Symbols Tatoos and Terminology 2006
- NSA Technical Report Key Management Infrastructure CI-2 Nodal Interface Description 2005
- NSA Technical Report Key Management Infrastructure System Security Architecture and Related Requirements 2005
- NSA Technical Report Key Management Infrastructure System Security Policy and Related Requirements 2005
- NSA Technical Report Key Management Infrastructure Concept of Operations 2005
- US Approaches for Applying Robustness Levels to the GIG IA RCD Attributes 2004
- CIA OSC China Imagery 2007
- CIA OSC The Google Controversy 2008
- US Department of Homeland Security Threats to Residential Facilities 2006
- US Department of Homeland Security Threats to Religous Facilities 2006
- US Department of Homeland Security Threats to Casinos 2006
- US Department of Homeland Security Threats to Hotels 2006
- US London Embassy Informer May 2008
- US London Embassy Informer Aug 2007
- US London Embassy Informer May 2007
- US Minimum Antiterrorism Standoff Distances for Buildings 2003
- US Joint Forward Operating Base manual 2005
- US Joint Fire Tactics Techniques and Procedures 2007
- US Army CALL 5-5 Operations in Mosul 2004
- US Army CALL 4-16 Cordon And Search 2004
- US Army CALL 5-6 Operation Enduring Freedom III 2005
- US Army Field Manual 3-07.22 Counterinsurgency Operations 2004
- US Army CALL 4-27 Convey Leader Training Vol II 2004
- US Army CALL 3-34 Mission Rehearsal Exercises for Operation Iraqi Freedom 2003
- US Army CALL 3-50.1 Personnel Recovery 2005
- US Army CALL 3-31 Route Clearance Operations 2003
- US Army CALL 4-7 Using Interperters 2004
- US Army CALL 4-13 CAAT II Initial Impressions Report 2004
- US State Department Animal Rights Extremists Power Point
- NCI Iraq Nuclear Weapon Capability 1991
- Kenyan Election Violence Alleged Perpetrators 2008
- Iraqi draft agreement on withdrawl of US Forces 6 august 2008
- Yang Yun olympics documentary
- East Timor Presidential assassination intelligence intercept map 2008
- Attempted assassination of President Ramos-Horta investigation documents 2008