Credit Market Chaos

Wary investors appear to be returning to Wall Street, the Journal reports, buying back into higher-risk debt issues from the likes of troubled Citigroup and Merrill Lynch. “Risk taking has come back in the market,” said one expert. More »

Credit Suisse has announced it lost a mammoth $2.1 billion in the first quarter, reports the Financial Times. The Swiss banking group, which until recently appeared to have escaped the worst of the credit crunch, continued to post strong earnings from its private banking sector—but that wasn't enough to outweigh writedowns of $5.2 billion. More »

In a sign of just how bad the credit crisis has become, Deutsche Bank has forbidden its employees from using expense accounts to pay for brothel visits and hotel porn, the Independent reports. It's unclear if execs have been seeking relief from subprime woes—the German giant has written down $4 billion—in fleshier pleasures, the paper adds. More »

The credit crunch isn't such a big deal if you're rich, the Financial Times reports. New figures show the number of millionaires grew quickly last year, to 8 million worldwide, and that the wealthy are getting richer relative to their compatriots. More »

Royal Bank of Scotland is preparing to issue new stock after conceding it was facing serious cash flow problems. After consulting with the Treasury and the nation's financial oversight authority, Britain's second-largest bank is planning a rights issue for around $24 billion to rebuild its capital reserves. The move may trigger a wave of other appeals for help, writes the Telegraph . More »

Citigroup reported a first-quarter loss of $5.1 billion today, posting another $14 billion in writedowns as a result of the credit crunch and loan defaults, the Wall Street Journal reports. The loss of $1.02 a share exceeded analysts' estimates and marks the second straight quarterly loss for the nation's biggest bank. It plans 9,000 layoffs next quarter. More »

Group of Seven finance ministers ended 3 days of meetings in Washington yesterday by endorsing a plan to create greater transparency and oversight in financial markets to avert future crises, but no emergency measures to stem the current one. Despite a downbeat report on the likelihood of worldwide recession, and even hunger riots as the cost of food continues to soar, responses to the credit crisis remain national responsibilities, writes the Wall Street Journal . More »

Ailing bank Wachovia will get a $6 billion-$7 billion shot in the arm from outside investors, the Wall Street Journal reports. Specifics of the capital infusion, designed to help the company recover from the credit crisis, haven’t been finalized. Details may be revealed when the company reports first-quarter earnings Monday; it moved the announcement up from Friday without explanation. More »

The Bank of England today cut its benchmark interest rate 25 basis points to 5%, reports Bloomberg, hoping to keep the nation’s economy out of recession. Despite the third cut since December, BoE’s rate remains the highest among the Group of Seven industrialized nations; policymakers have drawn fire for being “behind the curve” in responding to the credit crisis. More »

The International Monetary Fund says world economic growth will slow drastically in the next two years. In its new report, the IMF states that the world downturn will be led by the US, which will slip into a "mild recession" this year, the BBC notes. The report calls the current crisis "the largest financial shock since the Great Depression." More »

The Democratic Party of Japan has accepted a new central banker just in time for the crucial meeting of G7 finance leaders in Washington on Friday, reports the International Business Times . The top spot has been vacant since March 19, leaving the bank vulnerable during an unsteady economic time. Masaaki Shirakawa is expected to be formally nominated today as Bank of Japan chief. More »

Thousands of Bear Stearns employees face uncertain futures after the investment bank's takeover by JPMorgan, and they’re entering a Wall Street beset with problems and bereft of jobs, reports Reuters. "They are coming into a market at a time when Wall Street doesn't offer much opportunity," one analyst said. Of 26 top executive positions at JPMorgan, only five went to Bear employees. More »

Federal Reserve Chairman Ben Bernanke steps onto a tightrope today for two days of Congressional testimony focusing on the central bank’s starring role in the Bear Stearns bailout. Bernanke likely will be taken to task for not stepping in earlier, and more forcefully, to avert economic chaos, reports the New York Times . More »

Small banks, credit unions, states, and assorted politicians wasted no time ripping into the Bush administration’s plans to rework federal regulation of the financial industry, calling it an amateurish attempt by a “bunch of guys from Wall Street,” reports the Wall Street Journal. “It’s because none of those guys ever worked in a regulated, chartered bank," said one lobbyist for small banks. More »

Barry Diller might have won control over e-commerce company IAC/InterActiveCorp from rival John Malone in court Friday, but the CEO’s real trials have just begun. With the economy tanking and credit markets tightening, Diller’s plan to break up IAC into five “baby Barrys”—including Ticketmaster and the Home Shopping Network—might be tough to pull off, the Wall Street Journal reports. More »

Top financial regulators today challenged banks to come clean about risks they face, the Wall Street Journal reports. The Financial Stability Forum, a worldwide team of financial honchos—including several central bank chiefs—concluded that “hording of liquidity” was leading to “severe strains” in the lending market. Only greater transparency, they said, could restore lending confidence. More »

The two private-equity firms set to buy Clear Channel sued the group of banks they had engaged to fund the deal, the Wall Street Journal reports. Joined by Clear Channel, Bain Capital and Thomas H. Lee Partners accused the consortium—including Citigroup, Deutsche Bank, and Wachovia—of breaching contract by attempting to back out of the deal amid the tanking credit market. More »

Treasury Secretary Henry Paulson said today that investment banks owe the government more information about their financial condition if they are occasionally allowed to borrow money from the Federal Reserve, the New York Times reports. Paulson seemed to call for tighter regulations before calling the recent bailout of Bear Stearns "precedent only for unusual periods of turmoil." More »

The global credit crisis has spelled disaster for banks and hedge funds, but now worry is mounting that an entire country could go under. Yesterday the central bank of Iceland was forced to raise its interest rate 1.25 percentage points to 15% at an emergency meeting, reports the Financial Times . The surprise move was a desperate effort to curb runaway inflation and prop up the krona, a currency in free fall. More »

A $19 billion bid to privatize Clear Channel appears likely to fall through as buyers and financiers bicker—with credit-crunch-induced liquidity woes a major stumbling block, the Wall Street Journal reports. A credit agreement between private equity firms and the banks funding the move has become shaky. “No one wants to do this deal except for the seller,” said a source. More »