Archive for the ‘loans’ Category

Recession is Official: Could Last Into, Past 2010

December 2, 2008

The economy’s yearlong downturn, officially declared a recession Monday, could last well into next year or even beyond, challenging the government to devise new responses as traditional methods show limited results.

The National Bureau of Economic Research, the private body charged with determining the onset of a recession as well as its endpoint, said Monday that the current downturn met its definition of a recession: “a significant decline in economic activity spread across the economy, lasting more than a few months.”

By the Los Angeles Times

Read the rest:
http://www.latimes.com/business
/la-fi-econ2-2008dec02,0,25
87872.story

Advertisements

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

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

Global Financial Crisis, Intertwined Economies, Too Much Debt: Now What?

November 16, 2008

Barack Obama surely has one of the toughest leadership challenges any incoming president has ever faced. We’re in the midst of a terrible economic meltdown, the current administration has lost all credibility, the House of Representatives is full of knuckle-dragging Neanderthals, and the public is being whipsawed between free-market fundamentalists preaching the virtues of just letting the market rip and left-wingers who think we can punish Wall Street while protecting Main Street. It feels like a mess with no one in charge.
.

Now is when we need a president who has the skill, the vision and the courage to cut through this cacophony, pull us together as one nation and inspire and enable us to do the one thing we can and must do right now:

Go shopping.

Obama can’t wait until Jan. 20 to weigh in on this. If we don’t stimulate the global economy fast enough and big enough, some of Obama’s inaugural balls might be held in soup kitchens.

When President Bush told us to go shopping after 9/11, he was right. We needed to stimulate the economy then. The problem was that the Bush economic team never turned off the green light and told people to “go saving.” So with easy credit seemingly endlessly available, American consumers saved virtually nothing and bid up housing prices to record levels. Retailers expanded stores and China expanded factories to accommodate all the shopping. It was quite a party. We had banks in America giving mortgages to people whose only qualification “was that they could fog up a knife,” one mortgage broker told me.

By Thomas Friedman
The New York Times

But when something seems too good to be true, it usually is. When these reckless mortgages eventually blew up, it led to a credit crisis. Banks stopped lending. That soon morphed into an equity crisis, as worried investors liquidated stock portfolios. The equity crisis made people feel poor and metastasized into a consumption crisis, which is why purchases of cars, appliances, electronics, homes and clothing have just fallen off a cliff. This, in turn, has sparked more company defaults, exacerbated the credit crisis and metastasized into an unemployment crisis, as companies rush to shed workers.

Governments are having a problem arresting this deflationary downward spiral — maybe because this financial crisis combines four chemicals we have never seen combined to this degree before, and we don’t fully grasp how damaging their interactions have been, and may still be….

Read the rest:
http://www.nytimes.com/2008/11/16/
opinion/16friedman.html?scp=1&sq=jaws&st=nyt


“You’re gonna need a bigger boat.”

Global Financial Crisis May Fuel Instability and Weaken U.S. Defenses

November 15, 2008

Intelligence officials are warning that the deepening global financial crisis could weaken fragile governments in the world’s most dangerous areas and undermine the ability of the United States and its allies to respond to a new wave of security threats. 

By Joby Warrick
Washington Post Staff Writer

U.S. government officials and private analysts say the economic turmoil has heightened the short-term risk of a terrorist attack, as radical groups probe for weakening border protections and new gaps in defenses. A protracted financial crisis could threaten the survival of friendly regimes from Pakistan to the Middle East while forcing Western nations to cut spending on defense, intelligence and foreign aid, the sources said.

The crisis could also accelerate the shift to a more Asia-centric globe, as rising powers such as China gain more leverage over international financial institutions and greater influence in world capitals.

Some of the more troubling and immediate scenarios analysts are weighing involve nuclear-armed Pakistan, which already was being battered by inflation and unemployment before the global financial tsunami hit. Since September, Pakistan has seen its national currency devalued and its hard-currency reserves nearly wiped out.

Read the rest:
http://www.washingtonpost.com/w
p-dyn/content/article/2008/11/1
4/AR2008111403864.html?hpid=topnews

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

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

**********************

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.

Bailout Lacks Oversight Despite Billions Pledged

November 13, 2008

In the six weeks since lawmakers approved the Treasury’s massive bailout of financial firms, the government has poured money into the country’s largest banks, recruited smaller banks into the program and repeatedly widened its scope to cover yet other types of businesses, from insurers to consumer lenders.

By Amit R. Paley
The Washington Post
.
Along the way, the Bush administration has committed $290 billion of the $700 billion rescue package.

Yet for all this activity, no formal action has been taken to fill the independent oversight posts established by Congress when it approved the bailout to prevent corruption and government waste. Nor has the first monitoring report required by lawmakers been completed, though the initial deadline has passed.

“It’s a mess,” said Eric M. Thorson, the Treasury Department‘s inspector general, who has been working to oversee the bailout program until the newly created position of special inspector general is filled. “I don’t think anyone understands right now how we’re going to do proper oversight of this thing.”

In approving the rescue package, lawmakers trumpeted provisions in the legislation that established layers of independent scrutiny, including a special inspector general to be nominated by the White House and a congressional oversight panel to be named by lawmakers themselves.

U.S. Treasury Secretary Henry Paulson speaks during a news conference ...
U.S. Treasury Secretary Henry Paulson speaks during a news conference at the Treasury Building in Washington November 12, 2008. Paulson on Wednesday said he was backing away from buying troubled mortgage assets using a $700 billion bailout fund, instead favoring a second round of capital injections into financial institutions that would match private funds.(Mitch Dumke/Reuters)

Read the rest:
http://www.washingtonpost.com/w
p-dyn/content/article/2008/11/
12/AR2008111202846.html?hpid=topnews

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