On the heels of the Bear Stearns Failure…here’s a few news items that are being thrown around tonight.
Reuters: Bush, Plunge Protection to Hold Emergency Meeting Monday
President George W. Bush plans to meet on Monday with top U.S. financial
policymakers, the White House said, at a time of increased strains in credit
markets and fears of a recession. The White House said on Saturday Bush
will meet members of the President’s Working Group on Financial Markets,
and a spokeswoman said Bush will get a status report on the markets.
Wall Street Journal: Judgement Day Has Arrived
The U.S. is at the receiving end of a massive margin call: Across the
economy, wary lenders are demanding that borrowers put up more
collateral or sell assets to reduce debts. The unfolding financial crisis
appears to be broadening further. For years, the U.S. economy has been
borrowing from cash-rich lenders from Asia to the Middle East. American
firms and households have enjoyed readily available credit at easy terms,
even for risky bets. No longer. The growing crisis of confidence now
extends to the credit-worthiness of borrowers across the spectrum . . .
SF Chronicle: We’re Perilously Close to a Total “Financial Lockdown”
It started with subprime mortgages, spread to the rest of housing, moved
on to stocks and worked its way into virtually every corner of U.S. financial
markets. Now, seven months after the housing bust ushered in a period of
fear and loathing on Wall Street, the downward spiral has pushed the U.S.
financial system perilously close to a lending lockdown. That means big
trouble not only in the nation’s money centers, but also on Main Street,
where a credit crunch is eating away at jobs, spending and investing.
Wall Street Journal: Fed Aims to Prevent Panic with Direct Borrowing
In an unprecedented Sunday night announcement that underscores the
depth of the market fears, the Fed said it has created a new lending tool
to help its network of primary dealers — securities firms that interact with
the Fed daily but don’t fall under its direct banking supervision — provide
financing in securitization markets. Growing worries about securities backed
by mortgages are exacerbating the market upheaval and threatening the
overall economy.
Financial Times: Wall Street Braces for Cascading Failure Wave
Analysts said it was almost impossible to know what impact Bear Stearns’
problems would have on its clients, its counterparties and other investors
holding securities or derivatives that Bear is trying to liquidate. “The ripples
could be widely felt because Bear Stearns has so many points of contact
with everyone else in the financial industry,” said Matt D’Amico, partner in
the banking business at law firm Bryan Cave.
UK Independent: Wall Street Fears a Second Great Depression is at Hand
Wall Street is bracing itself for another week of roller-coaster trading . . .
One UK economist warned that the world is now close to a 1930s-like Great
Depression, while New York traders said they had never experienced such
fear. A Goldman Sachs trader in New York said: “Everyone is in a total
state of shock, aghast at what is happening. No one wants to talk, let
alone deal; we’re just standing by waiting. Everyone is nervous about what
is going to emerge when trading starts tomorrow.”
Financial Times: IMF Says Now is the Time to “Think the unthinkable . . .”
The IMF called for “decisive policy action” to strengthen the global financial
system, buffeted by fallout from the subprime crisis, noting that
authorities worldwide must also “think the unthinkable” so that they can
better anticipate and react to potential global economic risks.
L.A. Times: Several Major Financial Institutions Are Going to Fail
Some experts say Bear Stearns’ woes warn of potentially larger calamities
that will severely test the Fed, the economy and, ultimately, taxpayers as
the government gets more deeply involved in fixing the markets’ troubles.
“We will lose, in some form, several major financial institutions before this
is over,” said veteran economist Allen Sinai of Decision Economics Inc.
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