It would appear, from extracts of memoirs published about the dying days of Lehman Brothers, that aside from the US Administration pulling the plug on Lehman (the collapse of which then caused the meltdown of the global financial system) our dithering Prime Minister had a hand in it too.
Seemingly Barclays was on the cusp of sealing the deal, subject to approval from the UK government.
At the eleventh hour, out of the blue, Darling (having spoken to Brown) refused to give permission, despite being warned by the US that Lehman collapsing would cause global financial meltdown.
Is it not ironic that Brown, who claims to have saved the UK from even worse economic turmoil, is in fact more than partially responsible for causing the crisis in the first place?
Showing posts with label paulson. Show all posts
Showing posts with label paulson. Show all posts
Friday, October 30, 2009
Monday, November 24, 2008
Paulson Rescues Citigroup
The US government, in the shape of Hank Paulson (the hapless and hopeless US Treasury Secretary), has come to the rescue of Citigroup which has seen its shareprice collapse over the last week.
Paulson has come up with a package, including guarantees against losses on assets, worth $306BN together with a $20BN.
There is irony here.
Those of you with a reasonable memory may recall that when Lehman Brothers faced a similar crisis, Paulson was happy to let it go to the wall. The result being the current banking crisis and the world's worst recession since the 1930's.
The question that the shareholders and employees of Lehman Brothers doubtless wish to ask Paulson is this:
"Why do you consider Citigroup worth saving, but not Lehman Brothers?"
Paulson doubtless must now be wishing that he had rescued Lehman Brothers, thus saving the world from his self inflicted recession and banking crisis.
Bush and his team most assuredly are leaving behind them quite a legacy, whether this is the legacy that they would wish is of course another matter.
Paulson has come up with a package, including guarantees against losses on assets, worth $306BN together with a $20BN.
There is irony here.
Those of you with a reasonable memory may recall that when Lehman Brothers faced a similar crisis, Paulson was happy to let it go to the wall. The result being the current banking crisis and the world's worst recession since the 1930's.
The question that the shareholders and employees of Lehman Brothers doubtless wish to ask Paulson is this:
"Why do you consider Citigroup worth saving, but not Lehman Brothers?"
Paulson doubtless must now be wishing that he had rescued Lehman Brothers, thus saving the world from his self inflicted recession and banking crisis.
Bush and his team most assuredly are leaving behind them quite a legacy, whether this is the legacy that they would wish is of course another matter.
Tuesday, September 30, 2008
Madness
Yesterday I wrote that "Bush has done to the US economy what no terrorist or hostile country could ever do, that's quite a legacy!"
I was wrong, Bush merely loaded the gun; Congress, in an act of collective madness, has in effect destroyed the US economy by voting against the bailout plan.
Given that the plan was the only one on the table, one might ask why they jettisoned their only hope. Regrettably partisan politics outweighed commonsense and selflessness, as the Republicans used a speech by Nancy Pelosi (seemingly she hurt their feelings) as their excuse for voting "nay".
The result of this collective madness was entirely predictable, Wall Street suffered its worst ever one day fall in history (down 778 points).
The essential truth that those who cite "moral hazard" fail to grasp is this.
If your neighbour's house is buring down, even if he started the fire himself, you do not stand idly by watching it burn; you try to put it out.
Once the fire is out, you can punish him afterwards.
The "good people" in Congress will have a lot of explaining to do, when their constituents realise that falling shares mean that their savings and pension plans are going down the toilet.
Thursday is now slated for a rerun of the vote, let us trust that some commonsense now enters the minds of Congress.
I was wrong, Bush merely loaded the gun; Congress, in an act of collective madness, has in effect destroyed the US economy by voting against the bailout plan.
Given that the plan was the only one on the table, one might ask why they jettisoned their only hope. Regrettably partisan politics outweighed commonsense and selflessness, as the Republicans used a speech by Nancy Pelosi (seemingly she hurt their feelings) as their excuse for voting "nay".
The result of this collective madness was entirely predictable, Wall Street suffered its worst ever one day fall in history (down 778 points).
The essential truth that those who cite "moral hazard" fail to grasp is this.
If your neighbour's house is buring down, even if he started the fire himself, you do not stand idly by watching it burn; you try to put it out.
Once the fire is out, you can punish him afterwards.
The "good people" in Congress will have a lot of explaining to do, when their constituents realise that falling shares mean that their savings and pension plans are going down the toilet.
Thursday is now slated for a rerun of the vote, let us trust that some commonsense now enters the minds of Congress.
Monday, September 29, 2008
The Great Bailout
US President George Bush has said that Democrats and Republicans will come together to pass the bailout plan to rescue the US economy.
All well and good, if what he says actually comes to pass. However, the bailout was never a matter of merely throwing billions at the problem to make it go away but of injecting confidence into the economy.
The bailout plan had the possibility of working, until it became apparent that Paulson in fact had no plan and McCain pushed himself in front of the cameras in a bid to appear as a dealmaker (thus wrecking any possibility of th deal being passed last week).
Bush then publicly said that the world economy was in gave danger if the plan was not approved, and privately said during the disastrous McCain inspired meeting that "this sucker is going to go down". Paulson, pouring petrol on the flames, then got down on bended knee to Nancy Pelosi (House Speaker) begging her to pass the bill.
Those actions and words send a very clear signal that those in office are not in power. No matter how many billions of dollars are now thrown at this issue the markets have had the confidence kicked away from beneath them by the failed leadership in Washington, and the desire of a very old angry man to become president.
The road ahead is uncharted and dangerous. Bush has done to the US economy what no terrorist or hostile country could ever do, that's quite a legacy!
All well and good, if what he says actually comes to pass. However, the bailout was never a matter of merely throwing billions at the problem to make it go away but of injecting confidence into the economy.
The bailout plan had the possibility of working, until it became apparent that Paulson in fact had no plan and McCain pushed himself in front of the cameras in a bid to appear as a dealmaker (thus wrecking any possibility of th deal being passed last week).
Bush then publicly said that the world economy was in gave danger if the plan was not approved, and privately said during the disastrous McCain inspired meeting that "this sucker is going to go down". Paulson, pouring petrol on the flames, then got down on bended knee to Nancy Pelosi (House Speaker) begging her to pass the bill.
Those actions and words send a very clear signal that those in office are not in power. No matter how many billions of dollars are now thrown at this issue the markets have had the confidence kicked away from beneath them by the failed leadership in Washington, and the desire of a very old angry man to become president.
The road ahead is uncharted and dangerous. Bush has done to the US economy what no terrorist or hostile country could ever do, that's quite a legacy!
Wednesday, September 24, 2008
FBI Investigation
The Times reports that the FBI is investigating a number of executives from Fannie Mae, Freddie Mac, Lehman Brothers and AIG.
The Times states that are investigating as to whether the executives lied to shareholders, and whether fraud helped caused some of the troubles at these organisation.
The investigation includes whether executives deliberately misled the stock market about the state of their businesses.
Needless to say the politicians who oppose the $700BN Paulson bailout have latched onto this as another reason not to give money to greedy Wall Street bankers.
All well and good.
However, moral hazard and regulation can be addressed after the crisis has been dealt with.
When your neighbour's house catches fire (even if he started it deliberately) you do not stand idly by watching it burn (remonstrating with him about his stupidity), you help him put it out.
Another point that those who hate greedy bankers should remember is this, people were happy enough to borrow the money when it was cheap and to saddle themselves with debt; no one put a gun to their heads.
The Times states that are investigating as to whether the executives lied to shareholders, and whether fraud helped caused some of the troubles at these organisation.
The investigation includes whether executives deliberately misled the stock market about the state of their businesses.
Needless to say the politicians who oppose the $700BN Paulson bailout have latched onto this as another reason not to give money to greedy Wall Street bankers.
All well and good.
However, moral hazard and regulation can be addressed after the crisis has been dealt with.
When your neighbour's house catches fire (even if he started it deliberately) you do not stand idly by watching it burn (remonstrating with him about his stupidity), you help him put it out.
Another point that those who hate greedy bankers should remember is this, people were happy enough to borrow the money when it was cheap and to saddle themselves with debt; no one put a gun to their heads.
Tuesday, September 23, 2008
The Dead Cat Bounce II
Lats week I wrote about the rebound in shares, in response to the US bailout of the financial system, being a "dead cat bounce".
It would seem that I was right.
Shares in London and Asia have fallen sharply, as doubts grow about whether the $700BN bailout will work. At the time of writing:
-The FTSE is down 2%
-The CAC down over 1%
-The MSCI index of Asia-Pacific shares (excluding Japan) down 2%
-The Dow down over 3%
The package proposed by Henry Paulson, US Treasury Secretary, is expected to face opposition from members of Congress about how to pay for the plan.
Additionally, other American industries outside Wall Street have begun to ask for similar assistance; eg bans on short-selling have been requested by car and real estate companies.
Senator Richard Shelby, the leading Republican on the Senate Committee on Banking, Housing and Urban Affairs, said in a statement yesterday that the proposal was "neither workable nor comprehensive".
"I am concerned that the Treasury's proposal is neither workable nor comprehensive, despite its enormous price tag. In my judgment, it would be foolish to waste massive sums of taxpayer funds testing an idea that has been hastily crafted, and may actually cause the Government to revert to an inadequate strategy of ad hoc bailouts.
Given that markets have recently taken confidence in the prospect of government involvement, I believe Congress must immediately undertake a comprehensive, public examination of the problem and alternative solutions rather than swiftly pass the current plan with minimal changes or discussion. We owe the American taxpayer no less."
That is all very well, but the issue is one of confidence. A lengthy review will sap the confidence and destroy the financial system before any "cure" is discovered.
I noted last week:
"The actions taken may well soften the blow from the fallout of the sub prime crisis. However, the market cannot be bucked. There is a massive repricing of risk being undertaken which will negatively impact the share prices of financial institutions and, by definition, their willingness and ability to take on risk.
No matter what governments do this repricing will happen and the effects will be felt by everyone, from the CEOs of the leading banks to the ordinary man in the street seeking credit to buy a car or home.
The market will not be bucked. The surge in share prices is in effect a dead cat bounce, not a long term rally."
The bailout will not stop shares falling, but it will stop the world wide financial system from collapsing by giving it a much needed boost of confidence.
Testing times require bold measures.
Now is not the time for dithering and navel gazing.
It would seem that I was right.
Shares in London and Asia have fallen sharply, as doubts grow about whether the $700BN bailout will work. At the time of writing:
-The FTSE is down 2%
-The CAC down over 1%
-The MSCI index of Asia-Pacific shares (excluding Japan) down 2%
-The Dow down over 3%
The package proposed by Henry Paulson, US Treasury Secretary, is expected to face opposition from members of Congress about how to pay for the plan.
Additionally, other American industries outside Wall Street have begun to ask for similar assistance; eg bans on short-selling have been requested by car and real estate companies.
Senator Richard Shelby, the leading Republican on the Senate Committee on Banking, Housing and Urban Affairs, said in a statement yesterday that the proposal was "neither workable nor comprehensive".
"I am concerned that the Treasury's proposal is neither workable nor comprehensive, despite its enormous price tag. In my judgment, it would be foolish to waste massive sums of taxpayer funds testing an idea that has been hastily crafted, and may actually cause the Government to revert to an inadequate strategy of ad hoc bailouts.
Given that markets have recently taken confidence in the prospect of government involvement, I believe Congress must immediately undertake a comprehensive, public examination of the problem and alternative solutions rather than swiftly pass the current plan with minimal changes or discussion. We owe the American taxpayer no less."
That is all very well, but the issue is one of confidence. A lengthy review will sap the confidence and destroy the financial system before any "cure" is discovered.
I noted last week:
"The actions taken may well soften the blow from the fallout of the sub prime crisis. However, the market cannot be bucked. There is a massive repricing of risk being undertaken which will negatively impact the share prices of financial institutions and, by definition, their willingness and ability to take on risk.
No matter what governments do this repricing will happen and the effects will be felt by everyone, from the CEOs of the leading banks to the ordinary man in the street seeking credit to buy a car or home.
The market will not be bucked. The surge in share prices is in effect a dead cat bounce, not a long term rally."
The bailout will not stop shares falling, but it will stop the world wide financial system from collapsing by giving it a much needed boost of confidence.
Testing times require bold measures.
Now is not the time for dithering and navel gazing.
Monday, September 08, 2008
Freddie and Fannie Balied Out
President Bush bailed out Freddie Mac and Fannie May yesterday, as he announced that the two mortgage lenders would be taken over by the US government.
Seemingly they were weeks away from collapse.
President George Bush is quoted in The Times as saying that the failure of Freddie or Fannie would have been "unacceptable".
"Allowing the companies to fail or further deteriorate would damage our home mortgage market, and could weaken other credit markets that are unrelated directly to housing.
Americans should be confident that the actions taken today will strengthen our ability to weather the housing correction and are critical to returning the economy to stronger sustained growth."
Henry Paulson, the US Treasury Secretary, said:
"A failure would affect the ability of Americans to get home loans, auto loans and other consumer credit.
Fannie Mae and Freddie Mac are so large and so interwoven in our financial system that a failure of either of them would cause great turmoil in our financial markets here at home and around the globe."
This robust and decisive action contrasts with the dithering of the British government last year, when faced with the Northern Rock fiasco.
British banks have invested billions into bonds insured by Freddie and Fannie, had they collapsed the banks would have made significant losses.
We can breath a short sigh of relief, and be thankful that the US government did not shy away from a tough decision or dither over it.
Gordon Brown take note!
Seemingly they were weeks away from collapse.
President George Bush is quoted in The Times as saying that the failure of Freddie or Fannie would have been "unacceptable".
"Allowing the companies to fail or further deteriorate would damage our home mortgage market, and could weaken other credit markets that are unrelated directly to housing.
Americans should be confident that the actions taken today will strengthen our ability to weather the housing correction and are critical to returning the economy to stronger sustained growth."
Henry Paulson, the US Treasury Secretary, said:
"A failure would affect the ability of Americans to get home loans, auto loans and other consumer credit.
Fannie Mae and Freddie Mac are so large and so interwoven in our financial system that a failure of either of them would cause great turmoil in our financial markets here at home and around the globe."
This robust and decisive action contrasts with the dithering of the British government last year, when faced with the Northern Rock fiasco.
British banks have invested billions into bonds insured by Freddie and Fannie, had they collapsed the banks would have made significant losses.
We can breath a short sigh of relief, and be thankful that the US government did not shy away from a tough decision or dither over it.
Gordon Brown take note!
Friday, May 18, 2007
Wolfowitz Resigns
Paul Wolfowitz has finally comes to his senses and resigned (effective as from 30 June) as president of the World Bank.
The World Bank board will meet later today to discuss leadership issues, including the process of selecting the new president.
However, as is custom and practice, the White House still has the right to appoint the president. US Treasury Secretary, Henry Paulson, said that he would help President Bush to identify a nominee after consultations with other World Bank member countries.
The United States, the bank's largest shareholder, has named the World Bank chief since it formed the bank over 60 years ago.
However, this time around Bush will not find the process of nomination so straight forward:
1 Wolfowitz, a Bush nominee, failed in the post becuase he was arrogant and ignored ethics
2 Bush's presidency is imploding, rocked by domestic political scandals and the Iraq failure, his power and authority is draining away
3 Bush is despised by many European leaders
The failure of Wolfowitz is symbolic of the failure of Bush. The next US nominee will find that the other members of the bank will subject him/her to intense scrutiny before approving him/her.
The World Bank board will meet later today to discuss leadership issues, including the process of selecting the new president.
However, as is custom and practice, the White House still has the right to appoint the president. US Treasury Secretary, Henry Paulson, said that he would help President Bush to identify a nominee after consultations with other World Bank member countries.
The United States, the bank's largest shareholder, has named the World Bank chief since it formed the bank over 60 years ago.
However, this time around Bush will not find the process of nomination so straight forward:
1 Wolfowitz, a Bush nominee, failed in the post becuase he was arrogant and ignored ethics
2 Bush's presidency is imploding, rocked by domestic political scandals and the Iraq failure, his power and authority is draining away
3 Bush is despised by many European leaders
The failure of Wolfowitz is symbolic of the failure of Bush. The next US nominee will find that the other members of the bank will subject him/her to intense scrutiny before approving him/her.
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