Treasury chief pushes creation of agency; news lifts markets
CNBC Sep 18, 08 3:45 PM CDT
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The US government is considering the creation of a federal institution that would buy up bad debt from struggling Wall Street concerns, CNBC reports. Treasury Secretary Henry Paulson is reportedly pushing the proposal around Washington. By relieving financial institutions of toxic debt, they could return to lending money as per usual, perhaps stabilizing the country’s economy. News of the proposal gave stocks a huge lift today.
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MARKETS
Fed may have plan to quarantine bad debt; banks see gains
Wall Street Journal Sep 18, 08 3:25 PM CDT
(Newser)
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The markets rallied late in today’s rollercoaster session, keying on a $360 billion plan to shore up money markets and reports that the Fed might form a government body to absorb firms’ bad credit bets, the Wall Street Journal reports. The Dow gained 410.03 to close at 11,019.69. The Nasdaq closed up 100.25 at 2,199.10, while the S&P 500 rose 50.01, settling at 1,206.40.
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MARKETS
Wall Street Journal Sep 18, 08 9:05 AM CDT
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Stocks surged at the opening bell this morning, as traders registered approval of the central banks’ move to inject $360 billion into global money markets. The Dow jumped 118 points, while the S&P and Nasdaq rose 1.6% and 2% respectively. “These joint interventions are welcomed by the market, showing the Fed is trying to solve the logjam,” said one economist.
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ANALYSIS
The ills of the banking sector are spreading to industries previously thought resistant
Wall Street Journal Sep 18, 08 7:19 AM CDT
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The “worst financial crisis since the Great Depression” is spiraling downward and we may not have hit bottom yet, reports the Wall Street Journal in a look at how the subprime contagion has spread beyond its banking hosts, infiltrating sectors previously thought to be immune. “I think it’s going to last a lot longer than perhaps we would have anticipated,” said Xerox CEO Anne Mulcahy yesterday.
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UPDATED
Effects of worldwide effort on markets still unfolding
New York Times Sep 18, 08 4:34 AM CDT
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The Fed has joined forces with central banks in Europe, Japan and Canada to pump more dollars into the global financial system in a bid to fend off economic catastrophe, Bloomberg reports. The funds—$180 billion from the Federal Reserve and nearly as much from the other banks—are being made available for auction to global money markets in an effort to ease the crisis created by the collapse of Lehman Brothers and deepening fears about the economy, reports the New York Times .
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Central bank's new roles stretch balance sheet to the limit
New York Times Sep 18, 08 3:18 AM CDT
(Newser)
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The Fed's mammoth bailout of financial firms is unprecedented in the history of the central bank, which now must play new and contradictory roles, the New York Times reports. The Fed has often been called the nation's lender of last resort—but the acquisition of AIG and holding of Bear Stears securities now also make it the investor of last resort.
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From aircraft leasing arm to wealth management group
New York Times Sep 17, 08 9:49 AM CDT
(Newser)
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For one thing, the insurance behemoth the Federal Reserve just acquired for $85 billion is profitable, explains the New York Times . AIG, which started out insuring assets in Asia, is wildly diversified and sprawling globally. Businesses range from retirement plans in the US to life insurance in the Philippines to private banking in Zurich. Half of AIG's 116,000 employees are in Asia.
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ANALYSIS
Credit default business dooms, saves giant
Time Sep 17, 08 7:40 AM CDT
(Newser)
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The Federal Reserve seemed to draw a hard line against bailouts with Lehman Bros., but just days later it stepped over that line to save AIG. Why? First, says Time : Size. Its implosion would have been "as close to an extinction-level event" as we've been since the Depression. But also: Fear. Whereas Lehman’s collapse was long expected, AIG blindsided the Fed and market participants alike. The business is so complex and mysterious, and its reach so broad, that no one was sure what its failure would mean.
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Agency would formalize what feds are already doing in money crisis
New York Times Sep 17, 08 2:40 AM CDT
(Newser)
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The idea of creating a federal agency to dispose of the toxic debt at the heart of the credit crisis is gaining traction in Washington, the New York Times reports. The proposed agency would resemble one set up in 1989 to resolve the savings and loan crisis—but in a controversial extension would also acquire assets not backed by federal deposit insurance.
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MARKETS
Dow returns to 11K-plus territory
Bloomberg Sep 16, 08 3:17 PM CDT
(Newser)
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As AIG's future became somewhat clearer, the wildly fluctuating markets settled into positive territory at the end of today's session. Rumors that the Fed will bail out the mega-insurer helped nearly erase a 74% decline, Bloomberg reports. The Dow closed up 141.51 at 11,059.02, the Nasdaq gained 22.45 to 2,202.36, and the S&P 500 rose 20.86 to 1,213.56.
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UPDATED
Committee leaves rate at 2%, confounding investors' expectations
Wall Street Journal Sep 16, 08 1:38 PM CDT
(Newser)
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In its first unanimous interest rate decision in a year, the Federal Reserve voted today to leave its key interest rate unchanged at 2%. The decision reflects regulators' unwillingness to get even more involved in the developments roiling the financial markets, the Wall Street Journal reports. Stocks fell triple-digits on the news that an anticipated cut wouldn't materialize, but bounced back up in late afternoon trading.
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