Global Financial Crisis (Was: Subprime Meltdown)

[only_human]

http://www.ustreas.gov/press/releases/hp1144.htm

September 17, 2008 HP-1144
Treasury Announces Supplementary Financing Program

Washington- The Federal Reserve has announced a series of lending and liquidity initiatives during the past several quarters intended to address heightened liquidity pressures in the financial market, including enhancing its liquidity facilities this week. To manage the balance sheet impact of these efforts, the Federal Reserve has taken a number of actions, including redeeming and selling securities from the System Open Market Account portfolio.

The Treasury Department announced today the initiation of a temporary Supplementary Financing Program at the request of the Federal Reserve. The program will consist of a series of Treasury bills, apart from Treasury's current borrowing program, which will provide cash for use in the Federal Reserve initiatives.

Announcements of and participation in auctions conducted under the Supplementary Financing Program will be governed by existing Treasury auction rules. Treasury will provide as much advance notification as possible regarding the timing, size, and maturity of any bills auctioned for Supplementary Financing Program purposes.

Treasury Creates New Temporary Financing Program

According to an article by MarketWatch this afternoon, the Treasury Department issued $45 billion in 35-day cash management bills at a rate of 0.30 percent today.

UPDATE: New Treasury Program Created To Provide Cash To Fed

The Fed was in dire need of a balance sheet boost, according to a statement by Miller Tabak & Co. L.L.C.'s chief bond-market strategist Tony Crescenzi, released earlier Wednesday.

"If the Fed lends $85 billion to AIG, the Fed's Treasury holdings will be down to $195 billion" from close to $800 billion in Treasuries at the start of the year, he said. "The tally is so low that it is becoming imperative for the Fed to take actions to enlarge its balance sheet."

[sylvester]

Gentlemen!

The situation is stressfull, thus some entertainment may be in order. I'm going to quote an anonymous poster on one of the newsgroups I sometimes visit.

All hail the heroic proletarian leadership of Comrades Paulson and
Bernanke! All hail the September Revolution! Their brilliant plan for
reversing the historically absurd triumph of capitalism over the dialetical
principles of Marx and Lenin has now achieved complete success.

Think of it comrades: We have seized the commanding heights of the
international capitalist financial system -- in a bloodless coup!

Through our National Mortgage Soviet, we can control the US housing
market for decades to come.

With our new Global Insurance Soviet, we can throttle the lickspittle
financiers and bring their decadent bourgouis derivatives markets to heel.

By accepting common shares as collateral for loans from our People's
Federal Reserve Bank, we can accumulate ownership stakes in the remaining
White corporations, weakening their will to resist the inevitable victory
of the party and the workers' state.

Once Comrade Obama has been installed in the White House, fortified
by the achievements of Comrades Paulson and Bernanke, supported by
our Chamber of People's Deputies and our Supreme Soviet Senate, and
ruthlessly exercising the dictatorial powers accumulated by Comrade Bush,
final victory will be certain.

If only Comrades Stalin and Mao were alive to see this glorious day.

Thank you for your help.

[garo]

Very funny. Just substitute Comrade McCain for Comrade Obama. You cannot imagine that Bush, Paulson and Bernanke want Obama to win, can you? That assumption is just Kool-Aid.

[ewmayer]

This probably belongs in the "New U.S. president" thread, but since it involves a member of the international bankster clique, it somehow struck me as fitting for this thread:

NYTimes | the Opinionator | Endorsements of the Rich and Famous

“Lynn Forester de Rothschild, a prominent Hillary Clinton supporter and member of the Democratic National Committee’s Platform Committee, will endorse John McCain for president on Wednesday,” according to CNN’s Mark Preston.

“In an interview with CNN this summer, Forester did not hide her distaste for eventual Democratic presidential nominee Barack Obama. ‘This is a hard decision for me personally because frankly I don’t like him,’ she said of Obama in an interview with CNN’s Joe Johns. ‘I feel like he is an elitist. I feel like he has not given me reason to trust him.’ ”

“Irony truly is dead as Lynn Forester de Rothschild endorses John McCain on anti-elitism grounds,” responds Matthew Yglesias, who implies that Lady de Rothschild, the wife of the London banking family heir, Sir Evelyn de Rothschild, might have less-than-ideological grounds for her decision.

Ooh, snap - the fact that such a hero of the working class such as Mme de R doesn't like the halbschwarze "elitist" who somehow came out of nowhere to beat out her buddy Hillary, the heiress to the democratic throne, is sure to alienate the working and middle-class voters in the U.S., who have traditionally strongly identified with the wonderful and beneficent global Rothschild banking cabal.

On to today's news:

=======================

Britain Bans Short Selling of Financials, Citing "Extreme Pressure"

LONDON (MarketWatch) -- Britain's Financial Services Authority on Thursday banned short-selling of financial stocks and prohibited any increase in new bearish positions in the sector. Also, disclosure will be required on all positions of more than 0.25% of a stock. The regulator said it may extend the bank to other sectors. The ban is due to remain in force until Jan. 16, but it will be reviewed in 30 days. "While we still regard short-selling as a legitimate investment technique in normal market conditions, the current extreme circumstances have given rise to disorderly markets. As a result, we have taken this decisive action, after careful consideration, to protect the fundamental integrity and quality of markets and to guard against further instability in the financial sector," said Hector Sants, chief executive of the FSA.

Mish Shedlock's commentary on this latest desperate act by the financial communists:

"Banning short selling is an act of pure desperation guaranteed to fail. Short term, I do not know what the market will do, but if shorts are squeezed out an air pocket below will form just as happened in the US with share prices of Fannie Mae (FNM) Freddie Mac (FRE).

The simple fact of the matter is that short sellers add liquidity to the market. Barring bankruptcy, shorts have to cover at some point. Also short selling is a necessary function of market makers."

China, Russia Intervene In Equity Markets: On the heels of Central Banks announcing Global Coordinated Liquidity Measures, China and Russia have both announced plans to intervene directly in the equity markets.

President Dmitry Medvedev pledged $20 billion to support the Russian stock market and cut oil taxes to stem the country's worst financial crisis in a decade.

Medvedev ordered the government to "immediately" consider committing as much as 500 billion rubles to ensure "the stability of the stock market," which was closed after the Micex Index lost 25 percent over three days. Russian shares traded in London surged and the interbank lending rate plunged.

The government will slash duties on oil after the decline in crude from a record hurt exporters and reduced revenue. The president's intervention followed a meeting with central bank Chairman Sergey Ignatiev and Finance Minister Alexei Kudrin. Ignatiev also relaxed reserve requirements for lenders because of the turmoil in global markets and an estimated capital flight of at least $35 billion following last month's conflict in Georgia.

Interesting that the financial markets, rather than the hapless European, American and Asian governments, are the ones punishing Russia for its Georgian adventure.


Another big money-market fund "breaks the buck":

BNY Mellon Cash Fund Declines Below $1 a Share, Hit by Lehman Debt Losses: An institutional fund run by Bank of New York Mellon Corp. designed to work like a money-market account fell to less than $1 a share after losses on debt issued by bankrupt Lehman Brothers Holdings Inc.

Markets Rise on Massive Coordinated Liquidity Pump:

U.S. Stocks Rise on Central Banks' Fund Injections; Energy Shares Advance: U.S. stocks rose as the world's biggest central banks agreed to pump $247 billion into the financial system and Goldman Sachs Group Inc. predicted the bull market for commodities isn't over.

One wonders "what happens when the pump runs dry?" Translation of Goldman's bullish prediction; "Folks, we are getting absolutely crushed in all our highly leveraged commodities plays. Please, please, bid them up so as to make our speculative bet go green."

[garo]

Brilliant piece on Bloomberg:

http://www.bloomberg.com/apps/news?p...TOw&refer=home

Remember when everyone believed in Alan Greenspan? When John McCain, running for president in 2000, said that if Greenspan died he'd have him stuffed and propped up against the wall at the Federal Reserve, where he'd remain chairman?

We've just witnessed the largest bankruptcy in U.S. history and we know neither the inciting incident (though there is speculation that sovereign wealth funds decided to stop lending to Lehman Brothers Holdings Inc.), nor the deep cause. But there's now a pile of assets and liabilities smoldering in New York awaiting inspection.

And lots of other bits.

[ewmayer]

One simply needs to read today's Bloomberg headlines:

Paulson, Bernanke Seek to Rid Firms of Toxic Assets, Expanding U.S. Powers: The U.S. government moved to cleanse banks of troubled assets and halt an exodus of investors from money markets in the biggest expansion of federal power over the financial system since the Great Depression.


Fed Will Help Banks Meet Money-Fund Redemptions, Buy Debt to Aid Liquidity: The Federal Reserve said it will lend to banks to meet demands for redemptions from money-market mutual funds and plans to buy agency debt from primary dealers to aid financial-market liquidity.


Treasuries Decline as Paulson, Bernanke Work On Solution to Banking Crisis: U.S. two-year notes tumbled the most in 23 years as Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke announced a plan to help stem a collapse in financial-market confidence.


Morgan Stanley, Goldman Lead Financial Shares Higher on Bank-Rescue Plan: Morgan Stanley and Goldman Sachs Group Inc., the two biggest independent securities firms in the U.S., led financial shares higher after the government said it would take troubled assets off finance companies' balance sheets.


Short Sellers Come Under Fire in U.S., U.K. After Collapse of Lehman, AIG: The Securities and Exchange Commission halted short selling of 799 financial companies, pressing an assault on speculators after the collapse of Lehman Brothers Holdings Inc. and American International Group Inc.

Right...it wasn`t the financial firms` own greed and excessive speculative leverage that got them into trouble and made them a target for short sellers - it was the shorts themselves who forced the banks to accumulate trillions of dollars of toxic bad-mortgage-backed debt onto their balance sheets. Like I said, financial fascism at its finest. If you were one of the legal short sellers [who are an integral part of a healthy equities market, by providing liquidity and reining in irrational exuberance and excess speculative stock price appreciation - when they are allowed to trade freely, that is] who was scrambling to cover after yesterday's opening anti-shorting salvo by the SEC, this amounts to the government taking your money by decree, simply by saying "shorts are to blame" without providing a single shred of justification. Now that they`ve wiped out millions of short positions, they`re gonna go on a fishing expedition, find a few bad apples who were engaging in naked shorting [which was always illegal but to which the SEC famously turned a blind eye, at least while it was the big financials who were doing most of it and making big money doing so], say "see? We told you this was running rampant - economy would be in great shape except for the evil shorts", and provide a tidy post hoc justification for their illegal actions which the credulous mass media will swallow hook, line and sinker.

I swear, if this stands, I will leave the U.S. at the next decent opportunity and never return. I will not live under a fascist government-and-corporate kleptocracy.

Some perspectives on today`s unprecedented market intervention:

WSJ Blogs | The Government Decrees Stocks Will Rally


Weep for the Free Market

Government manipulation can never prevent financial Armageddon. In fact, government intervention and manipulation in the free markets eventually guarantees financial Armageddon.

Armageddon was not prevented, only delayed, and at taxpayer expense.

And lastly, I think I just found the *real* reason the U.S. Congress appears so ready and willing to give the crooks running the Fed, Treasury and SEC a free hand to manipulate the markets [preferably upward]:

Pelosi, Kerry Share Investor Pain as Lawmakers' AIG, Lehman Stakes Vanish: The market storm that brought down Lehman Brothers Holdings Inc., American International Group Inc. and other pillars of U.S. finance may have also blown holes in the portfolios of House Speaker Nancy Pelosi, Senator John Kerry and more than 50 other members of Congress.

[only_human]

http://www.ustreas.gov/press/releases/hp1147.htm

September 19, 2008 hp-1147

Treasury Announces Guaranty Program for Money Market Funds

Washington- The U.S. Treasury Department today announced the establishment of a temporary guaranty program for the U.S. money market mutual fund industry. For the next year, the U.S. Treasury will insure the holdings of any publicly offered eligible money market mutual fund – both retail and institutional – that pays a fee to participate in the program.

President George W. Bush approved the use of existing authorities by Secretary Henry M. Paulson, Jr. to make available as necessary the assets of the Exchange Stabilization Fund for up to $50 billion to guarantee the payment in the circumstances described below.

Money market funds play an important role as a savings and investment vehicle for many Americans; they are also a fundamental source of financing for our capital markets and financial institutions. Maintaining confidence in the money market fund industry is critical to protecting the integrity and stability of the global financial system.

Concerns about the net asset value of money market funds falling below $1 have exacerbated global financial market turmoil and caused severe liquidity strains in world markets. In turn, these pressures have caused a spike in some short term interest and funding rates, and significantly heightened volatility in exchange markets. Absent the provision of such financing, there is a substantial risk of further heightened global instability.

Maintenance of the standard $1 net asset value for money market mutual funds is important to investors. If the net asset value for a fund falls below $1, this undermines investor confidence. The program provides support to investors in funds that participate in the program and those funds will not "break the buck".

This action should enhance market confidence and alleviate investors' concerns about the ability for money market mutual funds to absorb a loss. Investors in money market mutual funds with a net asset value that falls below $1 would be notified that their fund triggered the insurance program.

The Exchange Stabilization Fund was established by the Gold Reserve Act of 1934. This Act authorizes the Secretary of the Treasury, with the approval of the President, "to deal in gold, foreign exchange, and other instruments of credit and securities" consistent with the obligations of the U.S. government in the International Monetary Fund to promote international financial stability. More information on the Exchange Stabilization Fund can be found at http://www.treas.gov/offices/international-affairs/esf/.

[jasonp]

Originally Posted by ewmayer

I swear, if this stands, I will leave the U.S. at the next decent opportunity and never return. I will not live under a fascist government-and-corporate kleptocracy.

Whenever the world gets me pissed off, I go back to Richard Hamming's famous speech:

Now you are going to tell me that somebody has to change the system. I agree; somebody's has to. Which do you want to be? The person who changes the system or the person who does first-class science? Which person is it that you want to be? Be clear, when you fight the system and struggle with it, what you are doing, how far to go out of amusement, and how much to waste your effort fighting the system. My advice is to let somebody else do it and you get on with becoming a first-class scientist. Very few of you have the ability to both reform the system and become a first-class scientist.

[sylvester]

Originally Posted by jasonp

Whenever the world gets me pissed off ...

Your attitude is sometimes refered to as internal emigration.

[ewmayer]

Exactly - I have no intention to "fight the system" because the system is fundamentally corrupt and even those allegedly in charge of it are slaves to the big-money players who have a massive vested interest in keeping history's greatest looting operation running.

However, I reserve the option to leave it - whether it will let me leave without stealing my hard-earned life's savings is however a pertinent and no longer tinfoil-hat-conspiratorial question.

More commentary from Mish's blog:

======================

Peak Insanity: Government Targets Short Sellers

Every time I think the height of insanity has been reached I have been proven wrong. My new official statement is: "There is no upward limit on insane actions by Congress, the SEC, the president, or for that matter anyone else."

My friend "CS" emailed me this evening.

I am almost shaking as I write this for what is happening to the capital markets, this country, and the free world. The impact of the past two weeks` action in the financial markets, if not reversed by cooler heads, will have irreparably changed the world in a way that only terrorist attacks and acts of war have in the past.

Nationalizing Fannie Mae and Freddie Mac, providing an emergency quasi-legal bridge loan to AIG, temporarily banning short-selling on all stocks in the US, and instituting an RTC-type entity to handle the toxic waste of the financial system is economic violence on a grand scale.

The long-term cost of these actions to dollar holders will likely be in excess of $1 trillion. The basic premise of a free economy is one governed by laws and not men, where property rights are respected, where individuals are free to make contracts with each other, and where honesty and transparency exist in the marketplace. It`s questionable whether any of these currently exist in the economy of the United States.

Before I continue let me provide a partial list of entities responsible for the financial mess we find ourselves in:

* -Fractional-reserve banking, which is inherently unstable and entirely a confidence game
* -Congress for passing the Federal Reserve Act and creating the Federal Reserve, the third central bank in the history of the US
* -Woodrow Wilson for using the Fed to finance World War 1
* -Benjamin Strong, the President of the Federal Reserve Bank of New York from 1914-1928, for inflating the money supply in the `20s to help out Great Britain which led to the Great Depression
* -Herbert Hoover for his economic intervention from 1929-1932. He was not laissez-faire by any means.
* -John Maynard Keynes for laying the foundation of a miseducated public
* -FDR for banning private ownership of gold, enacting the New Deal, creating Social Security and Fannie Mae, and exacerbating the Great Depression
* -The FDIC for lulling the American public into a false sense of security regarding their bank deposits and training the public to unquestionably trust the financial system
* -LBJ for the guns and butter of the `60s
* -Nixon for severing all ties between the US dollar and gold
* -Reagan`s intellectual duplicity, using free market, small government rhetoric while turning the US into a chronic debtor nation
* -Alan Greenspan, one of the most duplicitous, arrogant, and incompetent individuals in the history of the United States. If I had to pin this crisis on any one man, it would be he.
* -George W. Bush for cutting taxes while raising spending and his full embrace of Cheney`s doctrine of "deficits don`t matter"
* -Ben Bernanke for following the Greenspan doctrine to its inevitable conclusion
* -The heads of Fannie Mae and Freddie Mac for using artificially low borrowing costs to create systemically-dangerous housing institutions
* -Christopher Dodd and Barney Frank for beating the socialist drum
* -Christopher Cox for thinking a ban on short-selling will solve anything
* -Hank Paulson for folding the hand he was dealt
* -The ratings agencies for rubber stamping garbage assets as AAA
* -The heads of the major banks and brokerages on Wall Street for turning a blind eye as their institutions were taking on massive leverage that threatens to take down the financial system
* -The hedge funds that levered up structured finance to dangerous levels
* -Generations of lawmakers for kicking the looming financial crisis can down the road
* -Home buyers who lied about their income and creditworthiness
* -Predatory lenders who put people into mortgages they could never afford


Frankly, I don`t know where we go from here. Despite what government officials want, you cannot intervene your way to renewed credit and economic growth. The excesses of the past 25 years have come home to roost, and if we aren`t careful this country`s status as the hub of global capital markets and the holder of the world`s reserve currency will disappear.

Freezing foreclosures, mandating artificially low mortgage rates, sweeping junk assets on bank balance sheets under a Level 3 rug, delaying the writedown of debt, pursuing a witch hunt against legitimate players in the capital markets, and having the government be the lender and borrower of last resort will do nothing other than recreate the mistakes of the 1930s. Short-selling isn`t taking down financial firms, overlevered balance sheets of bad assets is.

This country has a lot of problems.

We have made commitments, militarily and to future retirees, that we cannot keep. We have an aging infrastructure and a reliance on diminishing fossil fuels. And we have lost confidence in the principles that led to our rise as the beacon of the free world. But there is a lot to embrace as well. We have great traditions of freedom and entrepreneurship. We have an educated, skilled populace that wants to make a better world for our children. And we have an undying belief in the American Dream, that hard work and thrift make the rags to riches story a possibility. But if we are to thrive in the 21st century we must reject the failed ways of the recent and not so recent past and rediscover that which made those who came before us proud to be American.

Thanks for reading,

CS

[sylvester]

No matter whether the USofA system turns communist or fascist, I want to be the first on the record as genuflecting towards: Herr Primzahlenführer Woltman and Comrade Prime Secretary Kurowski.