The End of the American Empire?

[Ninong]

The Chairman of the FDIC has persuaded Citigroup, Wells Fargo and Wachovia to cease filing new lawsuite against each other for the next 48 hours. That request came after Citigroup filed a $60 billion suit against Wells and Wachovia.

Apparently the FDIC is trying to get Citi and Wells to work out a deal to split up Wachovia between them. Hmmm... We'll see.

Here's an interesting development: The Reserve Bank of Australia just cut interest rates 1%. I wonder if Bernanke will cut the fed funds rate and the discount rate tomorrow morning by a similar amount?

The bailout isn't having much of an effect because Paulson isn't going to start buying any crappy mortgages, etc., for at least six weeks! By that time, the world as we know it could come to an end -- at least that's what well known loudmouth Jim Cramer is saying.

[Ninong]

Here's an interesting development: The Reserve Bank of Australia just cut interest rates 1%. I wonder if Bernanke will cut the fed funds rate and the discount rate tomorrow morning by a similar amount?

Fed to cut rates?

Many traders hope the Fed will also step in and cut interest rates before its next Federal Open Market Committee meeting on Oct. 29.

Hopes grew after a surprise decision by Australia's central bank to cut rates by a full percentage point overnight, its biggest rate cut since 1992.

One expert believes Australia's rate cut could mean Europe would follow suit.

The RBA cut rates 100 basis points last night (Tuesday in Australia) but so far no one else has followed suit.

Meanwhile, shares of Royal Bank of Scotland (RBS, news, msgs) fell 33% to $1.74 per share this morning after the bank reportedly met with U.K. Chancellor Alistair Darling on Monday about how to shore up confidence in the British banks.

[...]

Bank of America (BAC, news, msgs) late Monday pre-announced a 68% drop in its third-quarter results.

Shares of the Dow component fell $4.98, or 15.5%, to $27.24 in midday trading.

[...]

The legal battle between Citigroup (C, news, msgs) and Walls Fargo (WFC, news, msgs) over Wachovia (WB, news, msgs) took a hiatus today after the companies late Monday agreed to a two-day truce.


On Monday, Citigroup filed a suit against Wachovia and Wells Fargo seeking more than $60 billion in damages based on a breach-of-contract claim. The suit came a day after a New York State appeals court overturned an order blocking Wells Fargo from moving forward with its $15.1 billion offer to buy the bank. Wells Fargo made its bid for Wachovia on Friday, just days after Citigroup had offered to buy Wachovia's banking operations for $2.2 billion.

[...]

Thomson Reuters sees a dismal season for the S&P broadly.

"The estimated growth rate for Q3 2008 stands at -4.8%," the company said.

If the final growth rate for Q3 2008 is -4.8%, it will mark the first time the S&P 500 has recorded five consecutive quarters of negative earnings growth since Q1 2001 -- Q2 2002."

Meanwhile, everyone expects that the official government figures for the third quarter will show negative GDP growth. The past three quarters (Q4 2007 and Q1 & Q2 2008) were just barely positive. That's because government spending (such as the $10 billion a month on the war in Iraq) is included in GDP.

If you were to adjust government spending to what it would have been without the war in Iraq, we would have been in an official recession for the past four quarters. By traditional definition, a recession is two consecutive quarters of negative GDP growth. So even if the Q3 number is negative, that doesn't mean we're in a recession yet, using the traditional definition.

Sept. 15, 2008: "The fundamentals of our economy are strong." -- John McCain.

Sept. 15, 2008: "Senator McCain, what economy are you talking about." -- Barack Obama.

Sept. 16, 2008: "I was talking about the American workers. The American workers are strong." -- John McCain

[Ninong]

Dow Down More Than 300 Points Today!

The Dow is plunging again today, down more than 3%. The S&P500 and the NASDAQ are down close to 4%.

[Ninong]

Dow fell more than 500 points today!

The Dow fell another 500 points. It's now down more than 33% since last fall. The NASDAQ is down 40% and the S&P500 is down 37%.

[Ninong]

The RBA cut rates 100 basis points last night (Tuesday in Australia) but so far no one else has followed suit.

As expected, Bernanke cut the fed funds rate and the discount rate by 50 basis points. The European Central Bank, the Bank of England, and a whole bunch of other European central banks did the same.

The Dow was up more than 150 points a little while ago but it has now reversed course and started heading down again. As I type this it's down 164 points. That could change a lot by the time I hit the "submit reply" button.

In the past five trading days, the Dow has lost almost 15%.

[Ninong]

Ninong,

Also remember that Fannie Mae & Freddie Mac were mandated by congress to “push” money to “underserved” (read not really credit worthy) potential home buyers through loan companies that were only too eager to deliver.

So congress created this mess and now the tax players will have to pick up the tab.

Scott,

The charge that the CRA is somehow responsible for the subprime mess is a fairy tale being spread by the right. It's just not true.

Please read this article.

Thanks!

[Ninong]

Partial Nationalization of Largest Banks

This is something the Bush administration has been considering since last week. They will take control of "an ownership interest in" the largest national banks and perhaps a few large regional banks in an effort to reverse the current financial collapse.

You can read all about it here. No matter what they call it, it amounts to nationalization of the banking system. That's how bad things have gotten.


The Stock Market Is Crashing Today

Dow closed down 679 points (7.33%) at 8,579. It was 14,280 last fall. The Dow Jones Industrial Average is now down 40%.

The S&P500 is down 7.62% today and it is now down 42.25% since last fall. The NASDAQ is down 42.50% since last fall.

There is blood in the street today. Again. Here.

[Ninong]

Ford Motor Company: $2.08/share.

Ford closed today at $2.08, down from $9.00 a year ago and $30.00 when Bush took office.

General Motors: $4.76/share.

GM closed at $4.76, down from $43.20 a year ago and $90.00 when Bush took office.

GM has a market cap of just over $2 billion.

GM is on the verge of bankruptcy.

The government recently approved a $26 billion loan package to help save the US auto industry but it may be too little too late.

Should we save GM or should they be allowed to fail? Some of their newer facilities may be worth taking over but nobody is going to take over their older plants. The Germans and the Japanese have been very careful to locate their US assembly plants in the South were there are virtually no unions.

Both Ford and GM have enormous unfunded pension obligations. The government has allowed them to get away with that for decades. When the government takes over the pension plans of a bankrupt company (such as the airlines that go BK over and over again), the payouts are reduced.

Bush will be remembered as the worst president in American history and the president who presided over the collapse of the American financial system and the death of the American auto industry.