Posted Oct 24, 2008 12:07pm EDT
Amid the high drama on Wall Street, there was great theater in Washington D.C. this week as Alan Greenspan actually admitted the free-market, anti-regulation ideology that guided his tenure as Fed chairman was "flawed."
With financial institutions worldwide imploding amid what he called a "once-in-a-century credit tsunami,'' Greenspan was surprised to discover banks and brokers failed to regulate themselves.
"Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity, myself included, are in a state of shocked disbelief," he told the House Committee on Oversight and Government Reform.
Greenspan's mea culpa failed, however, to address an even bigger failing: His continued argument that no one could have seen the housing bust and related credit crisis coming, when various and sundry pundits predicted it for years.
From his inability (or refusal) to identify and try to deflate bubbles in tech stocks and then housing, to his blind faith in deregulation and derivatives, as well as generally easy money policies, Alan Greenspan's mistakes as Fed chairman are legion.
We're all paying the price for Greenspan's mistakes and he's yet another "hallowed institution" that's crumbled in recent years.
But to blame Greenspan for everything is wrong. Whether it was Democratic support for Fannie/Freddie, Republican desire for deregulation, Wall Street greed, feckless rating agencies, predatory lenders or irresponsible borrowing by homeowners, there's plenty of blame to go around.
It takes a village to make a financial crisis of such epic proportions. Until policymakers and pundits stop pointing fingers at the "other side," it's unlikely we'll see a resolution of this mess anytime soon.
Friday, October 24, 2008
Tuesday, October 7, 2008
Asian stocks plunge on unabated credit market woes
Wednesday October 8, 2:06 am ET
By Tomoko A. Hosaka, Associated Press Writer
Asian stocks plunge on unabated credit market woes; Nikkei plunges nearly 10 percent
TOKYO (AP) -- Asian stock markets tumbled Wednesday, with Japan's Nikkei index sinking nearly 10 percent, as recent steps by the world's major economies to fortify credit markets failed to stem fears that the spreading financial crisis could spawn a global recession.
After a miserable day on Wall Street when the Dow Jones industrials lost more than 500 points, investors in Asia responded by dumping stocks in a broad regional sell-off.
Japanese shares were hammered hard, with the benchmark Nikkei 225 stock average spiraling down nearly 10 percent to 9,159 in afternoon trading to its lowest intraday level in five years.
Shares of Toyota Motor Corp. sank 12 percent on reports that its operating profit would fall 20 percent in the fiscal year through March.
"Selling seems almost unstoppable because of uncertainty over the crisis," said Kazuki Miyazawa, market analyst at Daiwa Securities SMBC Co. Ltd. in Tokyo. "Investors simply don't find incentives to buy stocks."
The carnage was also brutal in Hong Kong, where the blue chip Hang Seng index plunged 5.6 percent to 15,871.
To ease the credit crunch, Hong Kong's de factor central bank said it will cut the benchmark interest rate by 1 percentage point to 2.5 percent. The move represents a break from Hong Kong's traditional pattern of following the U.S. Federal Funds target rate, which is now at 2 percent. The authority said it has changed its formula to calculate its base rate from 150 basis points above the prevailing U.S. fed funds rate to 50 basis points.
Australia's benchmark S&P/ASX200 shed 5 percent, wiping out a 1.7 percent gain on Tuesday after the country's central bank cut its key interest rate by a larger-than-expected 1 percentage point.
Asian markets were deep in the red: South Korea's benchmark index was down 6.1 percent, Thailand's market was down 6 percent, and Indonesia's stock market halted trading when its key index plunged 10 percent.
Investors in Indonesia seemed to be dismissing comments by the central bank governor Tuesday that Indonesia will avoid the worst of the global credit crisis. On Tuesday, the central bank raised interest rates a quarter percentage point, citing a two-year high in inflation.
"People are very, very nervous that Europe will get belted tonight as they didn't see a lot of the late losses in the U.S. session, and people just think it's going to get worse," said Ric Klusman, an institutional dealer with Aequs Securities in Sydney.
In New York Tuesday, the Dow lost more than 5 percent despite efforts by the Federal Reserve to reinvigorate the dormant credit markets by invoking emergency powers to lend money to companies outside the financial sector and buy up mounds of commercial paper, the short-term debt that firms use to pay for everyday expenses like salaries and supplies.
Federal Reserve Chairman Ben Bernanke warned in a speech Tuesday that the financial crisis could prolong the difficulty the economy is facing. While his remarks were widely regarded as a sign that an interest rate cut could be in the offing, Wall Street appeared little comforted and focused on his downbeat assessment.
In currencies, the dollar weakened slightly to 101.25 yen in Asia early Wednesday afternoon from 101.38 yen late Tuesday. The euro stood at $1.3585 compared with $1.3550.
By Tomoko A. Hosaka, Associated Press Writer
Asian stocks plunge on unabated credit market woes; Nikkei plunges nearly 10 percent
TOKYO (AP) -- Asian stock markets tumbled Wednesday, with Japan's Nikkei index sinking nearly 10 percent, as recent steps by the world's major economies to fortify credit markets failed to stem fears that the spreading financial crisis could spawn a global recession.
After a miserable day on Wall Street when the Dow Jones industrials lost more than 500 points, investors in Asia responded by dumping stocks in a broad regional sell-off.
Japanese shares were hammered hard, with the benchmark Nikkei 225 stock average spiraling down nearly 10 percent to 9,159 in afternoon trading to its lowest intraday level in five years.
Shares of Toyota Motor Corp. sank 12 percent on reports that its operating profit would fall 20 percent in the fiscal year through March.
"Selling seems almost unstoppable because of uncertainty over the crisis," said Kazuki Miyazawa, market analyst at Daiwa Securities SMBC Co. Ltd. in Tokyo. "Investors simply don't find incentives to buy stocks."
The carnage was also brutal in Hong Kong, where the blue chip Hang Seng index plunged 5.6 percent to 15,871.
To ease the credit crunch, Hong Kong's de factor central bank said it will cut the benchmark interest rate by 1 percentage point to 2.5 percent. The move represents a break from Hong Kong's traditional pattern of following the U.S. Federal Funds target rate, which is now at 2 percent. The authority said it has changed its formula to calculate its base rate from 150 basis points above the prevailing U.S. fed funds rate to 50 basis points.
Australia's benchmark S&P/ASX200 shed 5 percent, wiping out a 1.7 percent gain on Tuesday after the country's central bank cut its key interest rate by a larger-than-expected 1 percentage point.
Asian markets were deep in the red: South Korea's benchmark index was down 6.1 percent, Thailand's market was down 6 percent, and Indonesia's stock market halted trading when its key index plunged 10 percent.
Investors in Indonesia seemed to be dismissing comments by the central bank governor Tuesday that Indonesia will avoid the worst of the global credit crisis. On Tuesday, the central bank raised interest rates a quarter percentage point, citing a two-year high in inflation.
"People are very, very nervous that Europe will get belted tonight as they didn't see a lot of the late losses in the U.S. session, and people just think it's going to get worse," said Ric Klusman, an institutional dealer with Aequs Securities in Sydney.
In New York Tuesday, the Dow lost more than 5 percent despite efforts by the Federal Reserve to reinvigorate the dormant credit markets by invoking emergency powers to lend money to companies outside the financial sector and buy up mounds of commercial paper, the short-term debt that firms use to pay for everyday expenses like salaries and supplies.
Federal Reserve Chairman Ben Bernanke warned in a speech Tuesday that the financial crisis could prolong the difficulty the economy is facing. While his remarks were widely regarded as a sign that an interest rate cut could be in the offing, Wall Street appeared little comforted and focused on his downbeat assessment.
In currencies, the dollar weakened slightly to 101.25 yen in Asia early Wednesday afternoon from 101.38 yen late Tuesday. The euro stood at $1.3585 compared with $1.3550.
Monday, October 6, 2008
World stock markets tumble Monday on banking concerns
Monday October 6, 1:12 pm ET
Major markets in Europe, Asia and Latin America sank Monday as traders looked past America's bank bailout bill and focused on Europe's growing financial crisis.
The most influential European markets suffered big losses. London's FTSE 100 ended down 7.9%, the CAC 40 in Paris skidded 9%, and the XETRA DAX in Frankfurt tumbled 7.1%.
Russia's RTS index fared worse, shutting down after it fell more than 20%. The index lost 9% of its value in the first 30 minutes of the trading day.
Iceland halted trading in six bank stocks Monday, as Icelandic banks' assets dwarf the rest of its economy and its currency has fallen sharply in the past week.
The global financial meltdown also hit Latin America, where the economies are reliant on commodity exports.
Brazilian stocks plunged 15%, and trading was halted twice on Sao Paulo's Ibovespa index. Brazil's currency, the real, slumped nearly 7% to a near 2-year low. Mexico's IPC index dropped 9.6%, Argentina's Merval sank 9.4%, Chile's IPSA was down 6.8% and Colombia's IGBC fell 5.3%.
Experts say a worldwide economic slowdown could devastate the economies of Latin America, which have until recently reaped the rewards of historically high global demand for commodities. Falling markets could stem that demand.
Earlier Monday, Asian and Pacific markets ended roundly lower. Japan's Nikkei Exchange closed down 465.05 points, or 4.25%, at 10,473.09, a 4-1/2 year low. South Korea's Kospi index finished the day off 4.3%.
The Australian Securities Exchange plunged about 3.4% to 4,544.70, and Hong Kong's Hang Seng lost nearly 5% of its value, falling to 16,803.76.
In the U.S., the Dow Jones industrials plunged by as much as 587 points, falling below 10,000 for the first time since October 2004.
Meanwhile, the euro slid below the $1.36 mark for the first time in over a year.
Bailouts, deposit guarantees sink markets
The slump followed a weekend in which Germany's private financial sector promised to put up an additional 15 billion euros, in addition to the 35 billion euros already pledged, to help shore up Hypo Real Estate bank, the nation's Finance Ministry said Sunday.
The rescue package will help ailing Hypo, one of Germany's largest housing lenders. Earlier in the day, the German government said it would guarantee all private checking and savings accounts in an effort to abate a growing financial crisis in the country, a government official said.
European countries one after another announced deposit guarantees to relieve financial stress on banks and on their markets. Iceland and Denmark issued guarantees Monday after Germany, Ireland, France, Greece and Sweden did the same Sunday.
The guarantees began with Germany, which said it would guarantee all private bank savings and CDs in Europe's largest economy.
"We want to tell people that their savings are safe," said German Chancellor Angela Merkel on Sunday.
Coordinating a response
Yet investors jeered the guarantees, as they raised questions about their potential impact on government finances. Some analysts say the actions showed European governments could not agree on a unified approach to their financial crisis.
But European governments tried to find a coordinated response to the crisis sweeping financial markets.
European Union finance ministers were to meet in Luxembourg on Monday and Tuesday to discuss ways to boost the battered banking system. Italian Prime Minister Silvio Berlusconi is pushing a bailout similar to the one passed by the U.S. Congress last week and signed by President Bush on Friday.
Some analysts have said they expect the Federal Reserve, the European Central Bank and the Bank of England to orchestrate the first joint action on interest rates since the September 2001 terrorist attacks.
-- The Associated Press and CNNMoney.com staff writer David Goldman contributed to this report.
Major markets in Europe, Asia and Latin America sank Monday as traders looked past America's bank bailout bill and focused on Europe's growing financial crisis.
The most influential European markets suffered big losses. London's FTSE 100 ended down 7.9%, the CAC 40 in Paris skidded 9%, and the XETRA DAX in Frankfurt tumbled 7.1%.
Russia's RTS index fared worse, shutting down after it fell more than 20%. The index lost 9% of its value in the first 30 minutes of the trading day.
Iceland halted trading in six bank stocks Monday, as Icelandic banks' assets dwarf the rest of its economy and its currency has fallen sharply in the past week.
The global financial meltdown also hit Latin America, where the economies are reliant on commodity exports.
Brazilian stocks plunged 15%, and trading was halted twice on Sao Paulo's Ibovespa index. Brazil's currency, the real, slumped nearly 7% to a near 2-year low. Mexico's IPC index dropped 9.6%, Argentina's Merval sank 9.4%, Chile's IPSA was down 6.8% and Colombia's IGBC fell 5.3%.
Experts say a worldwide economic slowdown could devastate the economies of Latin America, which have until recently reaped the rewards of historically high global demand for commodities. Falling markets could stem that demand.
Earlier Monday, Asian and Pacific markets ended roundly lower. Japan's Nikkei Exchange closed down 465.05 points, or 4.25%, at 10,473.09, a 4-1/2 year low. South Korea's Kospi index finished the day off 4.3%.
The Australian Securities Exchange plunged about 3.4% to 4,544.70, and Hong Kong's Hang Seng lost nearly 5% of its value, falling to 16,803.76.
In the U.S., the Dow Jones industrials plunged by as much as 587 points, falling below 10,000 for the first time since October 2004.
Meanwhile, the euro slid below the $1.36 mark for the first time in over a year.
Bailouts, deposit guarantees sink markets
The slump followed a weekend in which Germany's private financial sector promised to put up an additional 15 billion euros, in addition to the 35 billion euros already pledged, to help shore up Hypo Real Estate bank, the nation's Finance Ministry said Sunday.
The rescue package will help ailing Hypo, one of Germany's largest housing lenders. Earlier in the day, the German government said it would guarantee all private checking and savings accounts in an effort to abate a growing financial crisis in the country, a government official said.
European countries one after another announced deposit guarantees to relieve financial stress on banks and on their markets. Iceland and Denmark issued guarantees Monday after Germany, Ireland, France, Greece and Sweden did the same Sunday.
The guarantees began with Germany, which said it would guarantee all private bank savings and CDs in Europe's largest economy.
"We want to tell people that their savings are safe," said German Chancellor Angela Merkel on Sunday.
Coordinating a response
Yet investors jeered the guarantees, as they raised questions about their potential impact on government finances. Some analysts say the actions showed European governments could not agree on a unified approach to their financial crisis.
But European governments tried to find a coordinated response to the crisis sweeping financial markets.
European Union finance ministers were to meet in Luxembourg on Monday and Tuesday to discuss ways to boost the battered banking system. Italian Prime Minister Silvio Berlusconi is pushing a bailout similar to the one passed by the U.S. Congress last week and signed by President Bush on Friday.
Some analysts have said they expect the Federal Reserve, the European Central Bank and the Bank of England to orchestrate the first joint action on interest rates since the September 2001 terrorist attacks.
-- The Associated Press and CNNMoney.com staff writer David Goldman contributed to this report.
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