Archive for the ‘lending’ Category

Meltdown far from over, new mortgage crisis looms

November 27, 2008

The full scope of the housing meltdown isn’t clear and already there are ominous signs of a new crisis — one that could turn out the lights on malls, hotels and storefronts nationwide.

By MATT APUZZO, Associated Press Writer

Even as the holiday shopping season begins in full swing, the same events poisoning the housing market are now at work on commercial properties, and the bad news is trickling in. Malls from Michigan to Georgia are entering foreclosure.

Hotels in Tucson, Ariz., and Hilton Head, S.C., also are about to default on their mortgages.

That pace is expected to quicken. The number of late payments and defaults will double, if not triple, by the end of next year, according to analysts from Fitch Ratings Ltd., which evaluates companies’ credit.

“We’re probably in the first inning of the commercial mortgage problem,” said Scott Tross, a real estate lawyer with Herrick Feinstein in New Jersey.

That’s bad news for more than just property owners. When businesses go dark, employees lose jobs. Towns lose tax revenue. School budgets and social services feel the pinch.

Companies have survived plenty of downturns, but economists see this one playing out like never before. In the past, when businesses hit rough patches, owners negotiated with banks or refinanced their loans.

But many banks no longer hold the loans they made. Over the past decade, banks have increasingly bundled mortgages and sold them to investors. Pension funds, insurance companies, and hedge funds bought the seemingly safe securities and are now bracing for losses that could ripple through the financial system.

“It’s a toxic drug and nobody knows how bad it’s going to be,” said Paul Miller, an analyst with Friedman, Billings, Ramsey, who was among the first to sound alarm bells in the residential market.

Read the rest:
http://news.yahoo.com/s/ap/20081127/ap_on_bi_ge/melt
down_coming_soon;_ylt=Ao5Sg.24hesMbnCpBUd_uzes0NUE

Free Media? Russia Investigates Financial Crisis Reporting

November 19, 2008

Prosecutors are launching inquiries across Russia against media reporting on the financial crisis in a bid to stem growing concern about its impact, the Kommersant newspaper reported on Wednesday.

“It’s not censorship. We’re just checking how reliable the information is,” a press official from the prosecutor general’s office was quoted as saying.

The official gave the example of unreliable reports about a bankruptcy causing a run on deposits from a bank in the Far Eastern port of Vladivostok.

AFP

File picture shows a vendor arranging newspapers at her stand ... 
File picture shows a vendor arranging newspapers at her stand in Moscow. Prosecutors are launching inquiries across Russia against media reporting on the financial crisis in a bid to stem growing concern about its impact, the Kommersant newspaper reported on Wednesday.(AFP/File)

Regional prosecutors have been ordered to check local media “in connection with measures taken by the Russian government to improve the situation in the financial sector and other sectors of the economy,” Kommersant said.

Investigators in Sverdlovsk, a key industrial region in the Ural mountains, are checking local media for attempts “to destabilise the situation in the region,” a spokeswoman for the local prosecutor’s office was quoted as saying.

“If we establish that the law has been violated, there could be disciplinary measures against the guilty, including criminal punishment,” she said.

Read the rest:
http://news.yahoo.com/s/afp/20081119/bs_afp/finance
economyrussiamediacrime_081119081653

Fighting the Financial Crisis, One Challenge at a Time

November 18, 2008

WE are going through a financial crisis more severe and unpredictable than any in our lifetimes. We have seen the failures, or the equivalent of failures, of Bear Stearns, IndyMac, Lehman Brothers, Washington Mutual, Wachovia, Fannie Mae, Freddie Mac and the American International Group. Each of these failures would be tremendously consequential in its own right. But we faced them in succession, as our financial system seized up and severely damaged the economy.

By Henry M. Paulson, Jr.
Treasury Secretary
Op-Ed, The New York Times

Treasury Secretary Henry Paulson addresses a gathering of corporate ...
Treasury Secretary Henry Paulson addresses a gathering of corporate CEOs, Monday, Nov. 17, 2008. (AP Photo/J. Scott Applewhite)

By September, the government faced a systemwide crisis. After months of making the most of the authority we already had, we asked Congress for a comprehensive rescue package so we could stabilize our financial system and minimize further damage to our economy.

By the time the legislation had passed on Oct. 3, the global market crisis was so broad and so severe that we needed to move quickly and take powerful steps to stabilize our financial system and to get credit flowing again. Our initial intent was to strengthen the banking system by purchasing illiquid mortgages and mortgage-related securities. But the severity and magnitude of the situation had worsened to such an extent that an asset purchase program would not be effective enough, quickly enough. Therefore, exercising the authority granted by Congress in this legislation, we quickly deployed a $250 billion capital injection program, fully anticipating we would follow that with a program for buying troubled assets.

There is no playbook for responding to turmoil we have never faced. We adjusted our strategy to reflect the facts of a severe market crisis, always keeping focused on our goal: to stabilize a financial system that is integral to the everyday lives of all Americans. By mid-October, our actions, in combination with the Federal Deposit Insurance Corporation’s guarantee of certain debt issued by financial institutions, helped us to accomplish the first major priority, which was to immediately stabilize the financial system.

Read the rest:
http://www.nytimes.com/2008/11/18/opinion
/18paulson.html?_r=1

At the Washington summit meeting, China holds the cards

November 14, 2008

It is not clear how much the leaders of developed and developing countries from around the world, gathered to discuss a fast-moving financial crisis with a soon-to-depart president of the United States, can hope to accomplish.

By Mark Landler and Stephen Castle
International Herald Tribune

But the summit meeting in Washington this weekend may clarify one thing: how fundamentally the crisis is reshaping the economic map, rendering obsolete the old club of Western powers that fashioned the financial pillars of the post-World War II era at a conference in Bretton Woods, New Hampshire, in 1944.

While President Nicolas Sarkozy of France proposed the meeting and President George W. Bush agreed to be host of an expanded conference of G-20 nations, the most sought-after country at the gathering some are calling Bretton Woods II is likely to be China.

With nearly $2 trillion in foreign exchange reserves and an economy that is still growing – even if more slowly than it was before the crisis erupted – China is one of the few participants with the financial power to aid countries in distress, either directly or by contributing to the coffers of the International Monetary Fund.

“We will actively participate in rescue activities for this international financial crisis,” Yi Gang, deputy governor of the Chinese central bank, told a news conference Friday in Beijing, according to Reuters. It was one of the clearest indications yet that China stood ready to help the IMF aid countries hit by the global credit crisis.

Read the rest:
http://www.iht.com/articles/2008/11/14/business/summit.php

GM failure: The shockwave

November 14, 2008

If General Motors really does run out of money by the end of the year, as it predicted was possible, the impact would be felt far and wide – to hundreds of suppliers, rival automakers and ultimately dealers across the nation.

“Once the first domino falls, it rapidly takes out all the other dominoes,” said Dennis Virag, president of the Automotive Consulting Group.

Suppliers would be among the first to feel those effects since GM only manufactures the body, the engine and the transmission used in its cars.

In the United States alone, GM spends $31 billion on parts from 2,100 different suppliers. These include the “direct suppliers” involved in producing a vehicle – those that provide everything from steering wheels and seatbelts to brakes and airbags – as well as “indirect suppliers” – those that make things such as gloves, protective eyewear, shop rags and lightbulbs.

By Peter Valdes-Dapena, CNNMoney.com senior writer

Read the rest:
http://money.cnn.com/2008/11/14/autos/auto_failure_
ripple_effect/index.htm?postversion=2008111412

Global Economic Mess Makes G-20 Summit Sober, Serious, Anti-Junket

November 14, 2008

There are no plans for sightseeing tours, shopping sprees or three-anything lunches when leaders from 20 countries, accompanied by large delegations of officials, business people and journalists, visit the capital during the next two days for a world economic summit.
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By Pamela Constable 
Washington Post Staff Writer

Instead, the event promises to be brief, sober and businesslike, in keeping with the grim financial outlook facing every country at the summit, including the host, and the timing of the meeting during a power lull between administrations in Washington.

“There will not be much time. Our delegation will arrive at 6 p.m. tomorrow and leave right after the meeting and possibly a press conference Saturday,” Emanuel Lenain, a spokesman for the French Embassy, said yesterday. Between formal discussions, he said, President Nicolas Sarkozy “will work and work.” His glamorous wife, former model Carla Bruni, will not be with him, and he will attend tonight’s White House dinner alone.

Read the rest:
http://www.washingtonpost.com/wp-dyn/content/article/2008/11/13/AR2008111304039.html

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G-20 To Consider Monitoring World Banking Among Proposal

By Anthony Faiola and Glenn Kessler

Washington Post Staff Writers
Friday, November 14, 2008; Page A01

Nations are close to adopting a series of measures aimed at combating a global recession and laying the groundwork for a broad reconstruction of the international financial system, as world leaders arrive in Washington for a major economic summit this weekend.

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http://www.washingtonpost.com/w
p-dyn/content/article/2008/11/13
/AR2008111303844.html

China’s Economy: Weak Sister or Strong in Fundamentals?

November 14, 2008

Weakness in China’s economy is worsening and the government faces a severe challenge as it tries to avert a sharp downturn, an official said Friday, as new data showed investment growth cooling.

“The downturn trend in our economy is more obvious, especially since September. We hope a rapid downturn in growth will not occur,” Mu Hong, a deputy chairman of the nation’s main planning agency, said at a news conference.

Mu expressed confidence Beijing’s multibillion-dollar stimulus package would help the country weather the global downturn. But he said, “This international financial crisis is a new challenge for us. It is a severe challenge.”

Beijing is moving quickly to launch the package and will distribute most of a planned 100 billion yuan ($15 billion) in additional government spending within the next two weeks, Mu said. He said the money will be spent on housing, rural development, highways, public health and environmental protection.

Read the rest from CNN:
http://www.cnn.com/2008/BUSINESS/11/14/china.economy.a
p/index.html?section=cnn_latest

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China’s Economic Fundamentals Are Strong

BEIJING (AFP) – China said Friday the fundamentals of its economy remained strong amid the global financial crisis and it was confident of maintaining fast growth.

Following a slew of figures released this week showing growth in the world’s fourth largest economy was continuing to slow, senior government officials insisted the country was weathering the international storm.

A woman shops for vegetables in Beijing. The fundamentals of ... 
A woman shops for vegetables in Beijing. The fundamentals of China’s economy remain good despite the global financial crisis, with the government confident of maintaining fast growth, a senior official said(AFP/File/Frederic J. Brown)

“The origin of the financial crisis is outside the country and its impact on our financial system is limited. The fundamentals of our economy are still good,” National Development and Reform Commission vice chairman Mu Hong said.

Mu pointed to a stimulus package worth four trillion yuan (586 billion dollars) announced over the weekend as proof of the government’s ability and commitment to keeping the economy growing swiftly.

“I think the central government‘s decision to make significant changes to economic policy … showed its firm determination and confidence in stabilising the economy and maintaining fast growth,” he said.

“This determination and confidence are not baseless. They are based on the judgements of the domestic and international economic environment and the situation in China.”

Speaking at the same briefing on the financial crisis and China’s response, central bank vice governor Yi Gang said the nation’s banking system had plenty of money, indicating no concerns about a US-style credit crunch.

Read the rest:
http://news.yahoo.com/s/afp/20081114/bs_afp/finance
economychina_081114065615

China’s Premier Says Global Financial Meltdown “Worse Than First Thought” for China

November 13, 2008

China’s Premier Wen Jiabao said the effect of the global financial meltdown on the country was “worse than expected,” state media said Thursday, in a sign of growing concern at the impact of the crisis.

AFP

Chinese Premier Wen Jiabao at a press conference in Beijing. ... 
Part geologist, part economist, Chinese Premier Wen Jiabao at a press conference in Beijing. Wen Jiabao has said the effect of the global financial meltdown on the country was “worse than expected,” state media have said, in a sign of growing concern at the impact of the crisis.(AFP/File/Eric Feferberg)  

Wen was quoted as making the assessment by the director of the National Bureau of Statistics Ma Jiantang when he briefed his staff on Tuesday, according to the website of the bureau’s newspaper China Information News.

“The impact of the global financial crisis on the Chinese economy is much worse than many had expected,” Ma said according to the website, passing on remarks made by Wen.

China initially said the global financial crisis would not cause too much harm to its economy, but in recent days the signals from Beijing have changed markedly.

Wen’s comment comes after the Chinese government unveiled a four trillion yuan (586 billion dollars) economic stimulus plan on Sunday aimed at boosting domestic consumer demand in the face of flagging exports.

Reversal: $700 Billion Rescue Program NOT To Buy Troubled Assets

November 12, 2008

Treasury Secretary Henry Paulson said Wednesday the $700 billion government rescue program will not be used to purchase troubled assets as originally planned.

Paulson said the administration will continue to use $250 billion of the program to purchase stock in banks as a way to bolster their balance sheets and encourage them to resume more normal lending.

By MARTIN CRUTSINGER, AP Economics Writer

 
Treasury Secretary Henry Paulson said Wednesday the $700 billion government rescue program will not be used to purchase troubled assets as originally planned. Photo: Associated Press

He announced a new goal for the program to support financial markets, which supply consumer credit in such areas as credit card debt, auto loans and student loans.

Read the rest:
http://news.yahoo.com/s/ap/20081112/ap_on_bi_ge/
financial_meltdown;_ylt=AlOjuzzp7Mg
_YNmhDJGmChes0NUE

Poll Tells Obama: Fix Economy First; Tax Cuts When You Can

November 12, 2008

People want the tax cuts promised during the presidential campaign, but they may be willing to wait while President-elect Obama takes on the larger issue of fixing the economy.

Only 36 percent say trimming income taxes should be a top priority when the new president takes office in January, according to a new Associated Press-GfK poll. That was less than half the 84 percent who cited improving the economy as a No. 1 goal, and the 80 percent who said creating jobs should be a paramount task.

“I don’t think it’s going to work in this instance,” said Ryan Anderson, 31, a Democrat from Bloomington, Minn., who thinks tax reductions would have little impact on most families’ budgets. “That’s kind of like shooting a BB gun at a freight train.”

Obama promised to cut taxes for working families during the campaign.

By ALAN FRAM and TREVOR TOMPSON, Associated Press Writers

Even fewer — 29 percent — said another top priority should be Obama’s plan to allow tax cuts to expire for families earning more than $250,000 a year. He has said he would use the revenue that would raise to help finance some of his priorities.

Amid such talk, 72 percent in the AP-GfK poll voiced confidence Obama will make the changes needed to revive the stalling economy. Underscoring how widely the public is counting on its new leader, 44 percent of Republicans joined nearly all Democrats and most independents in expressing that belief.

Obama has called for about $175 billion in new stimulus spending, including for public works projects, and has said he would make it a top priority in January if it is not enacted by a lame-duck session of Congress and President Bush this year.

The poll shows trust in Obama’s ability to succeed is even broader, at least for now. Sixty-eight percent said they think when he takes office in January, the new president will be able to enact the policies he pushed during his presidential campaign.

Read the rest:
http://news.yahoo.com/s/ap/20081112/ap_on_go_
pr_wh/ap_poll_obama;_ylt=ArhlQW_
78Fn7nRDh2uPpJ_qs0NUE