The General Economy Sucks Thread

[mcsluggo]

yes... this is a real shit-sanwich from both sides.

I am tired of listening to the election rants (of house members) as this crisis threat builds bigger and bigger. There is a void in leadership in both parties right now.

[Mavdog]

well, those who advocate "letting the economic cycle run its course" are getting their wish.

it isn't going to be pretty.

the issue I have is this could have been avoided, the proposal was mislabeled (it's an earnout not a bailout) and our congress is a bunch of pansies.

we need some leadership...is there a true leader out there?

[mary]

Nader?






I kid, I kid.

[Arne]

These congressmen were afraid of their constituencies it seems... Amazing.

Now stop the Federal Reserve from pumping all this money into the economy.

Fed Pumps Further $630 Billion Into Financial System (Update3)

By Scott Lanman and Craig Torres



Sept. 29 (Bloomberg) -- The Federal Reserve will pump an additional $630 billion into the global financial system, flooding banks with cash to alleviate the worst banking crisis since the Great Depression.

The Fed increased its existing currency swaps with foreign central banks by $330 billion to $620 billion to make more dollars available worldwide. The Term Auction Facility, the Fed's emergency loan program, will expand by $300 billion to $450 billion. The European Central Bank, the Bank of England and the Bank of Japan are among the participating authorities.

The Fed's expansion of liquidity, the biggest since credit markets seized up last year, came hours before the U.S. House of Representatives rejected a $700 billion bailout for the financial industry. The crisis is reverberating through the global economy, causing stocks to plunge and forcing European governments to rescue four banks over the past two days alone.

``Today's blast of term liquidity will settle the funding markets down, and allow trust to slowly be restored between borrowers and lenders,'' said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. On the other hand, ``the Fed's balance sheet is about to explode.''

The MSCI World Index of stocks in 23 developed markets sank 6 percent, the most since its creation in 1970. Credit markets deteriorated further as authorities tried to save more financial institutions from collapse.

European Rescue

European governments have rescued four banks in two days and the Federal Deposit Insurance Corp. said today it helped Citigroup Inc. buy the banking operations of Wachovia Corp. after its shares collapsed. The Standard & Poor's 500 Index fell 3.8 percent and the cost of borrowing dollars for three months rose to the highest since January. The rate for euros hit a record.

``If people think the authorities may give in to fears, they are wrong,'' Financial Stability Forum Chairman Mario Draghi said today in Amsterdam, where the international group of regulators and finance officials is meeting. ``There is willingness and determination on winning the battle to restore confidence and stability.''

Banks and brokers have slowed lending as they struggle to restore their capital after $586 billion in credit losses and writedowns since the mortgage crisis began a year ago. The bankruptcy of Lehman Brothers Holdings Inc. also sparked fears among banks they wouldn't be repaid by counterparties, driving up the cost of short-term loans between banks.

Funding Risk

``By committing to provide a very large quantity of term funding, the Federal Reserve actions should reassure financial market participants that financing will be available against good collateral, lessening concerns about funding and rollover risk,'' the central bank said.

The Bank of England and the ECB will each double the size of their dollar swap facilities with the Fed to as much as $80 billion and $240 billion, respectively. The Swiss National Bank and the Bank of Japan will also double their dollar swap lines, while the central banks in Australia, Norway, Sweden, Denmark and Canada tripled theirs.

All the banks extended their facilities until the end of April 2009.

The Fed is also increasing the size of its three 84-day TAF sales to $75 billion apiece, from $25 billion. That means the Fed will make a total of $225 billion available in 84-day loans. The central bank will keep the sales of 28-day credit at $75 billion.

Special Sales

In addition, the Fed will hold two special TAF sales in November totaling $150 billion so banks can have funding available for one or two weeks over year-end. The exact timing and terms will be determined later, the Fed said. The TAF program began in December, totaling $40 billion.

The bank-rescue plan being debated by Congress today would give the Fed more power over short-term interest rates by providing authority as of Oct. 1 to pay interest on reserves held at the central bank by financial institutions. That would make it easier for the Fed to pump funds into the banking system.

Paying interest on reserves puts a ``floor'' under the traded overnight rate, which would allow a central bank ``to provide liquidity during times of stress'' without affecting the rate, New York Fed economists said in a paper last month.

To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.netCraig Torres in Washington at ctorres3@bloomberg.net.

Last Updated: September 29, 2008 14:28 EDT

[Mavdog]

yeah, let's stop "pumping money into the economy" so we can just grind to a screeching halt.

unemployment and poverty are so underrated....

[Arne]

Originally Posted by Mavdog

yeah, let's stop "pumping money into the economy" so we can just grind to a screeching halt.

unemployment and poverty are so underrated....

Poverty will come through inflation, as well. Having a recession is not the end of the world. A recession will clean out the malinvestments and make sure that resources are used where the market can use them most efficiently.

[Arne]

The Rescue Package Will Delay Recovery

Daily Article by Frank Shostak | Posted on 9/29/2008


In his testimony to the Congress on September 24, Fed Chairman Bernanke urged the legislators to quickly approve the bailout of the financial sector with a package of $700 billion. Bernanke echoed Treasury Secretary Paulson's view that the bailout expense, while hefty, is needed to remove from banks' balance sheets the mortgage-linked assets, which are paralyzing the flow of credit.

I think it's extraordinarily important to understand that as we have seen many previous examples in different countries and in different times that choking up of credit is like taking the lifeblood away from the economy.
Most experts came out in strong support for the package. Without the rescue package, many large institutions that are "too big to fail" could go belly up. Many believe that the consequences of all this could be very severe to the real economy.

It is true that the financial system must be rescued; it must be rescued from the institutions holding bad debt that are currently draining capital while waiting for a bailout and adding little in return. It is they that are preventing wealth-generating activities in the financial sector and the other parts of the economy from expanding real wealth.

The Essence of Economic Adjustment
Conventional thinking presents economic adjustment — also labeled as "economic recession" — as something terrible, even the end of the world. In fact, economic adjustment is not menacing or terrible; from an economic point of view, it is nothing more than a time when scarce resources are reallocated in accordance with consumers' priorities.

Allowing the market to do the allocation always leads to better results. Even the founder of the Soviet Union, Vladimir Lenin, understood this when he introduced the market mechanism for a brief period in March 1921 to restore the supply of goods and prevent economic catastrophe. Yet for some strange reason, most experts these days cling to the view that the market cannot be trusted in difficult times like these.

If central bankers and government bureaucrats can fix things in difficult times, why not in good times too? Why not have a fully controlled economy and all the problems will be fixed forever? The collapse of the Soviet Union's centralized system is the best testimony one can have that controls don't work. A better way to fix economic problems is to allow entrepreneurs the freedom to allocate resources in accordance with society's priorities.

In this sense, the best rescue plan is to allow the market mechanism to operate freely. Allowing the market to do the job will result in some activities disappearing all together while some other activities will in fact be expanded.

Take, for instance, a company that has six profitable activities and four losing activities. The management of the company concludes that the four losing activities must go. To keep them alive is a threat to the survival of the company; these activities rob scarce funding from profitable activities.

Once the losing activities are shut down, the released funding can now be employed to strengthen the winning activities. The management can also decide to use some of the released funding to acquire some other profitable activities.

This is precisely what the government rescue package prevents from happening. The government package is not going to rescue the economy, but it will rescue activities that the economy cannot afford and that consumers do not want. It will sustain waste and promote inefficiency, draining resources from growth and efficiency. Remember: government is not a wealth generator; it can only take resources from A and give them to B.

Can the Rescue Package Prevent Economic Disruptions?
Some supporters of the package are of the view that the package is necessary in order to prevent economic disruptions. They mean by this that various phony activities should be kept alive by wealth generators for a little bit longer until a proper system is established. By "proper," they mean more controls.

For a while, the government's package can appear to be working; this is because there is still enough real savings to support both profitable and unprofitable activities. If, however, savings and capital are shrinking, nothing is going to help, and the real economy will follow up with further declines.

Hence the rescue package cannot prevent so-called economic disruptions. If anything, government intervention would make these disruptions much worse. Again, a better alternative is to let the market do the job. The market's ability to make swift adjustments without much drama was vividly illustrated only a few weeks ago when the very large investment bank, Lehman Brothers, was allowed to go belly up. The world did not come to an end. Instead, this was a healthy development. A money loser was eliminated from the market. This freed up resources to promote growth.

One could have made the case that when Lehman was on the brink it was too big to fail — assets of $639 billion and employing over 26,000 people. Yet in a few days the market, once allowed to do the job, reallocated the good pieces of Lehman to various buyers and the bad parts have vanished. It was poetry.

Likewise Merrill Lynch, which was bought by the Bank of America, will see the good parts of it reinforced while the useless parts are likely to be removed.

On September 18, 2008, Washington Mutual, the largest US saving and loan bank, was forced into liquidation. The bank had $307 billion in assets and $188 billion in deposits. What prompted the closure are heavy losses on its $227 billion book of real-estate loans, of which a large portion was in subprime mortgages.

The bank lost $6.3 billion in the nine months ending June 30. Against this background, and coupled with customers withdrawing $16.7 billion over the past ten days, government regulators decided to close the bank.

Observe that this was the largest US banking failure. Note that the closure of the bank didn't result in the end of the world. JP Morgan Chase bought some of the good assets of Washington Mutual for $1.9 billion.

On this, Jeffrey Tucker made the following observation,

But as wonderful as the daily shifts and movements are, what really inspires are the massive acts of creative destruction such as when old-line firms like Lehman and Merrill melt before our eyes, their good assets transferred to more competent hands.… This is the kind of shock and awe we should all celebrate. It is contrary to the wish of all the principal players and it accords with the will of society as a whole and the dictate of the market that waste not last and last. No matter how large, how entrenched, how exalted the institution, it is always vulnerable to being blown away by market forces — no more or less so than the lemonade stand down the street.
Most commentators have accepted that the root problem of the current financial crisis is the lack of proper control over mortgage lending. But the out-of-proportion explosion in the mortgage lending didn't occur out of the blue. Without the aggressive lowering of interest rates by the Fed, mortgage lending couldn't have exploded. The Fed lowered the federal-funds rate target from 6% in January 2001 to 1% by June 2003. The 1% was kept until June 2004.

The loose monetary stance prepared the ground for various false activities that wouldn't have been around without the loose stance. If authorities had kept strong controls over mortgage lending, while at the same time creating money out of thin air, the excesses would have popped up in some other sector. The banks would have ended up having plenty of bad non-mortgage-related assets.

The Fed's loose policies are the crux of the problem. So rather than blaming the symptoms, what is required is to let the market work and close all the loopholes that allow the creation of money and credit out of thin air.

Can Making Banks' Balance Sheets Look Good "Fix" the Economy?
Recall that Treasurer Paulson and the Fed chairman are of the view that once banks' bad assets are removed, the banks are likely to move ahead and start lending. We suggest that making the balance sheet look pretty is not going to alter the essence of the problem, which is the poor state of capital and savings to support such high lending activities.

The essence of a sound credit market is not lending money as such but lending the real stuff that people require by means of money. Without the real stuff — the preceding savings and subsequent productivity to fund the lending — no lending is possible.

Decades of nonproductive consumption (consumption that is not backed up by production) that emerged on the back of loose monetary and fiscal policies have severely damaged the store of wealth that serves as the foundation for credit markets. If this is the case, it will be futile to try to boost lending by pushing more money into the banking system. More money cannot generate real wealth. If it could, world poverty would have been eliminated a long time ago.

When the market is allowed to take charge, the relationship between savings, lending, and productivity will be brought into proper perspective. At last we will know which activities are genuine and which are phony.

Does the Fall in Stock Prices Cause an Economic Slump?
The proponents of government intervention maintain that one cannot allow the market to take charge since this will cause a drop in stock prices, which will be bad for the economy. Within the confines of this way of thinking, it is not surprising that Bernanke and Paulson panicked on September 18, once a large money-market mutual fund — the Reserve Primary Fund — was on the brink.

They argue that were it not for the Fed's injecting $105 billion and the subsequent announcement of the rescue package, the stock market would have had a massive fall. They also believe that the massive monetary injection prevented a run on money-market mutual funds and prevented a major disaster.

They further believe that if people had taken the money out of their money-market mutual funds, banks wouldn't be able to secure money to fund credit cards and various consumer and business loans. This in turn would have paralyzed the economy.

So let us think about this. Say that people take their money from the money-market mutual funds. What happens then? They will have placed it somewhere else, mostly likely with commercial banks. Hence money wouldn't disappear and banks could continue to fund activities as before.

If large money-market funds were to go under, some of their assets would be sold and the shareholders would suffer losses; this however, cannot provide justification for the Fed to pump money and to introduce a rescue package. Monetary expansion and a rescue package do not undo the bad investment decisions of the money-market-mutual-fund managers. Why should people who didn't risk investments in the fund pick up the tab?

A fall in asset prices, including stocks, and a run on financial institutions are just symptoms and not the cause of anything. The key factor behind the current difficulty in the credit markets is the lagged effect coming from the Fed's tighter stance between June 2004 and August 2007, when the federal-funds-rate target was raised from 1% to 5.25%.

The tighter stance started to undermine various bubble activities that had emerged from the previous loose stance. A tighter stance slowed the diversion of real savings from wealth generators towards bubble activities. Without an adequate supply of real funding, these activities started to crumble. Obviously, then, banks that have been providing support to these activities by providing loans have ended up holding a large amount of bad assets.

As a result, bank stock prices started to come under pressure. With a time lag, bubbles in the various other parts of the economy are also likely to come under pressure, and this again is going to hurt financial stocks. So the fall in economic activity is not the result of a fall in stock prices, but rather comes on account of the tighter Fed stance that throttled the supply of real savings to non-wealth-generating activities.

Would the stock market have come under pressure if the Fed had kept the interest rate at 1% for an indefinite period of time? A prolonged loose stance would have given rise to a much greater amount of nonproductive bubble activities. As a result, the pace of real wealth generation would have continued to slow, and consequently the growth momentum of profits would have come under pressure. In response to this, commercial banks would have become more cautious in their expansion of credit out of thin air.

All this in turn would have undermined the existence of bubble activities. Bubble activities cannot stand on their own feet; once the rate of growth of the money supply slows down, the pace of the diversion of real savings towards false activities follows suit. As a result, the survival of these activities is threatened.

From this we can infer that a fall in non-wealth-generating activities — also labeled an economic slump — is not due to a fall in the stock market as such but to the previous loose monetary policy that has weakened the pool of real savings.

"The government package is not going to rescue the economy, but it will rescue activities that the economy cannot afford and that consumers do not want."
The central-bank policies aimed at preventing a fall in the stock market cannot prevent a fall in the real economy. In fact, the real economy has already been damaged by the previous loose monetary stance. All that the fall in the stock market does is inform us about the true state of economic conditions. The fall in the price of stocks just puts things in a proper perspective. The fall in the stock price is just an acknowledgment of reality.

Conclusion
Only a few weeks ago, we saw that the liquidation of a large bank such as Lehman Brothers and the sale of Merrill Lynch did not cause massive disruptions. In fact, the adjustment was swift and almost invisible. The reason for the smooth adjustment is that the market was allowed to do its job. If government and Fed bureaucrats had tried to intervene with bailouts, the whole process would have taken much longer and would have been very costly in terms of real resources.

Frank Shostak is an adjunct scholar of the Mises Institute and a frequent contributor to Mises.org. He is chief economist of M.F. Global. Comment on the blog.

http://mises.org/story/3131

[Mavdog]

Originally Posted by Arne

Poverty will come through inflation, as well.

through mild inflation? nah.

poverty will come with heavy deflation as well.

Having a recession is not the end of the world. A recession will clean out the malinvestments and make sure that resources are used where the market can use them most efficiently.

yeah, the depression was such a pleasant time for all involved. let's do it again!

markets do not need to go to extremes to work efficiently.

[Arne]

Originally Posted by Mavdog

through mild inflation? nah.

poverty will come with heavy deflation as well.



yeah, the depression was such a pleasant time for all involved. let's do it again!

markets do not need to go to extremes to work efficiently.

Yeah, during the great depression markets were allowed to function properly...

I recommend this book:

Murray N.Rothbard - America's Great Depression

It's free...

[FINtastic]

Originally Posted by Arne

Poverty will come through inflation, as well. Having a recession is not the end of the world. A recession will clean out the malinvestments and make sure that resources are used where the market can use them most efficiently.

Why do you think poverty will come through inflation.?

[Mavdog]

inflation decreases purchasing power of the currency.

[rabbitproof]

and the fed says 'f you, congress'?

http://www.reuters.com/article/bonds...31779020080929

[mcsluggo]

[Flacolaco]

Pretty soon a Double Cheeseburger is going to cost $1.09

[DirkFTW]

If my math is correct, America gained $700 billion today from the stock surge!

[FINtastic]

Originally Posted by Mavdog

inflation decreases purchasing power of the currency.

Don't you think a rise in wages will likely offset the inflation though, at least in the long run (assuming we aren't dealing with ridiculous levels in inflation)? I suppose it could be a problem if you were merely living off your savings (i.e. a retiree).

I know there is a redistribution of wealth from creditors to debtors. But normally the people lending aren't really in danger of being considered poor.

I could be missing something though since Arne appears to be a pretty hard-core Austrian, a school of thought which my Economics teachers did not really teach heavily so I was interested to see what his reasoning was here.

[Mavdog]

Originally Posted by FINtastic

Don't you think a rise in wages will likely offset the inflation though, at least in the long run (assuming we aren't dealing with ridiculous levels in inflation)? I suppose it could be a problem if you were merely living off your savings (i.e. a retiree).

I know there is a redistribution of wealth from creditors to debtors. But normally the people lending aren't really in danger of being considered poor.

yes, the assertion of arne is only credible with high levels of price inflation. wages will rise to offset the decrease in purchasing power, with the downside that increases in wages also contributes to upward pressure on prices tho.

decreasing purchasing power, or devaulation of currency, does negatively affect those who do not have income as their savings buys them less goods. also it benefits debtors as they repay debt with cheaper money than what they borrowed.

the inflation levels of the past two decades have been negligible, although it appears to be accelerating since mid 2007. the current downturn has seen some deflation especially in commodity prices (decreased demand)

being a hard currency advocate arne views inflation as an unnecessary illness of central bankers and fiat money.

[Arne]

Originally Posted by FINtastic

Don't you think a rise in wages will likely offset the inflation though, at least in the long run (assuming we aren't dealing with ridiculous levels in inflation)? I suppose it could be a problem if you were merely living off your savings (i.e. a retiree).

I know there is a redistribution of wealth from creditors to debtors. But normally the people lending aren't really in danger of being considered poor.

I could be missing something though since Arne appears to be a pretty hard-core Austrian, a school of thought which my Economics teachers did not really teach heavily so I was interested to see what his reasoning was here.

It's not only creditors to debtors. The money that is injected into the economy isn't injected evenly. It enters at one specific point and the person/institution who gets to use the money first will pay the old prices, whereas the people who can increase their income last (the elderly, working people, etc., etc. will pay higher prices because prices adjust before their wages rise. - Inflation is a transfer of wealth from the poor and the middle class to the Wall Street, the politically well connected, etc.

[Flacolaco]

So now they're going to raise the FDIC insurance from 100k to 250k.....and then hope basically the same bill passes the vote? (Have they done anything else to it?)

I hope they vote it down again. I don't think that's good enough to get things going. I think eliminating altogether, or significantly reducing the capital gains tax is what I would be holding out for. If they want capital flowing into the market place again, they need to give people a good reason.

[Mavdog]

the hope is the raising of the fdic insurance limit will stop the irrational withdrawls from banks (such as what killed wamu). people were pulling their deposits out of these banks and placing them into money market accounts at firms such as fidelity and vanguard. if the deposits stay with the banks it helps the bank's balance sheets, which in theory allows the banks to make loans.

changing the capital gains tax will do nothing but motivate investors to sell their assets if they can realize a profit (a profit which might be difficult to come by in this down market btw). that will mean nothing to the lenders that are the focus of this bill, a bill that is intended to help lenders liquidate their difficult to sell assets into cash so they can then lend. if individuals are selling the mbs the bill is allowing the government to purchase, they won't be realizing a gain anyway they will be realizing a loss.

the bill is not intended to motivate investors to move money into equities. that is not what the economy is in need of at this time, and besides long term capital gains tax is currently at 15% (or 5% for some).

[Underdog]

Financial hubs see an opening up at the top
Wall Street's long, dominant run is fading, global financiers say

link


SHANGHAI - Looking down from his building's 87th floor at the glittering signs of multinational banks along the river here, Fan Dizhao declared confidently that Wall Street's reign as the world's No. 1 financial hub is coming to an end.

The United States may be grappling with its worst economic crisis since the Great Depression, but these are go-go days in China.

Venture capital, private equity and foreign direct investment are at all-time highs. Although Shanghai's stock exchange has lost close to two-thirds of its value this year, China's big banks have escaped the credit catastrophe largely unscathed, and the economy continues to expand briskly.

Fan, an investment manager at Guotai Asset Management, which oversees funds valued at about $5.1 billion, said that despite the country's inexperience in the financial sector, China has a rare trump card: mountains of cash.

"It is inevitable," he said, "that we will take the U.S.'s place as the world leader."

But Shanghai is just one of several cities harboring ambitious -- and to some analysts, fanciful -- aspirations while the global finance industry is reshuffled.

Tokyo has lifted some regulations on banks and insurance groups and has begun to do something it resisted for a long time: print securities documents in English. The Singapore government, which through its massive sovereign wealth funds has increased its private equity and other financial holdings in recent years, has said it is looking to invest in more distressed assets in the United States.

And Dubai, riding the Middle East's oil-fired boom, has declared itself the center of Islamic finance and says it aims, in the words of Dubai's government, to "develop the same stature as New York."

With U.S. investment houses tumbling into bankruptcy, consolidating operations or transforming themselves into more closely regulated commercial banks, Wall Street's reputation as the prime address to raise capital, seek investment advice or trade securities is no longer rock-solid.

The flow of capital had already begun moving away from the United States this summer. A survey released last week about the competitiveness of world financial centers found that New York and London, often neck-and-neck in such rankings, were still at the top.

But the survey also found that the two cities' lead over their rivals shrank after February because of the credit crisis and the collapse of U.S. securities firms. Frankfurt, Germany, and Paris also lost ground. Cities in Asia and the Middle East, meanwhile, were deemed most likely to gain in importance.

"Dubai, Singapore, Shanghai and Mumbai -- they are the probable leaders," said Michael Mainelli, executive chairman of Z/Yen group, which carried out the survey. Researchers looked at factors including infrastructure, foreign direct investment, cost of living and the presence of a fair and just business environment.

Arkady Dvorkovich, senior economic adviser to Russian President Dmitry Medvedev, said the U.S. financial crisis could benefit Moscow. "We are not naive," he said. "We're not trying to say that Russia will substitute for the United States in the financial sense, but in certain niches, there's a certain window of possibility for Russia to be a much more active player.

Russia could "serve as a leading financial system for neighboring countries and Eastern Europe in the medium-term, in the next five to seven years," he said.

Firms in some financial centers are using the Wall Street breakdown to snap up assets -- and people, tens of thousands of whom have been laid off in the past few months.

Japan's Mitsubishi UFJ bought up to a 20 percent share of Morgan Stanley for $8.4 billion, while Nomura Holdings said it would buy the Asian, European and Middle Eastern operations of Lehman Brothers.

Dubai's International Financial Center, meanwhile, boasts that its tenants are eligible for benefits such as a zero tax rate on profits, 100 percent foreign ownership and no restrictions on foreign exchange or repatriation of capital. In addition, said Mohammed Abu Ali, an assistant professor of economics at Dubai's American University, "Dubai has an ideal location. It is located between the East and the West. It is in a good time zone. And it has a very dynamic economy."

Hussain al-Qemzi, chief executive of the Noor Islamic Bank, which is majority-owned by the Dubai government, aims to turn the city into a hub for Islamic banks, prohibiting usury, that would rival Wall Street's traditional banks.

Shanghai first got the serious attention of global financiers last November when its bourse hit record highs and PetroChina became, albeit briefly, the world's first $1 trillion company, surpassing the value of U.S.-based Exxon Mobil.

But many analysts dismissed that rise as irrational exuberance because of Shanghai's multiple drawbacks as a financial center: its lack of experienced workers, its strict capital controls and concerns about rule of law and courts that still sometimes put political interests over justice.

Yet the recently opened Shanghai World Financial Center, a 101-story marvel of glass and steel, has become a beacon for dealmakers from around the world. The 138 seats at the center's $200-a-head French restaurant, quaintly known as the Dining Room, are booked solid for the next three weeks. And although Lehman Brothers scrapped plans to rent offices and Morgan Stanley cut its leased space from eight to four floors, there are plenty of Chinese companies waiting to move in.

Shanghai officials say the city simply aims to reclaim the status it enjoyed in the 1920s and '30s, when the grand old bank buildings in the famous Bund area along the Huangpu River buzzed with activity.

"To us the crisis might be beneficial because we can attract more talent from Wall Street to Shanghai," said Shi Haining, deputy director of the city's Pudong New Area financial services office. "There are also possible outgoing investments, because Wall Street lacks liquidity. And there may be money that might have gone to the U.S. that comes to China instead."

Shi said the city may offer one-time rent subsidies of up to $29,000 for apartments, education stipends and 20 to 40 percent tax breaks to lure talented financial services workers from overseas. The China Investment Corp., the country's $200 billion sovereign wealth fund, has also launched a recruitment drive that aims to fill more than 30 prominent positions such as high-return bond investment manager and direct investment manager with foreign talent.

"This applies to the people on Wall Street, including the ones that have been laid off," Shi said. "They are the ones that Shanghai needs very much."

Jenny Li, a headhunter who has more than 50 clients in the financial services field, said all of them are scrambling to recruit people laid off from troubled Wall Street firms. A few years ago, many of those same people would probably have dismissed such offers, but today, China is seen as "the last party of the world economy," said Li, who works for Hewitt Associates.

Robert Theleen, chairman of ChinaVest, a U.S.-run merchant bank with offices in Shanghai, said that what defines a great financial center may be changing as a result of the turmoil on Wall Street.

"If you look at financial centers in the past, one of the words that come into mind will be freedom: freedom of movement, freedom of ideas and freedom of information. In that regard, I think Shanghai is behind," he said.

However, Theleen said, "maybe after the financial crisis in New York, freedom will be less important than security and safety." He said he believes this will give Shanghai a huge advantage.

In November, Mayor Han Zheng said his goal was to have the infrastructure needed to become a world finance hub ready by 2010 and to have "achieved the status" by 2020. The city called in international consultants, including former World Bank president James D. Wolfensohn, to help.

[mcsluggo]

Originally Posted by Flacolaco

So now they're going to raise the FDIC insurance from 100k to 250k.....and then hope basically the same bill passes the vote? (Have they done anything else to it?)

I hope they vote it down again. I don't think that's good enough to get things going. I think eliminating altogether, or significantly reducing the capital gains tax is what I would be holding out for. If they want capital flowing into the market place again, they need to give people a good reason.

YOu are thinking long-run here ... (what do you think the capital "gain" tax will be on equity in waccovia this year? shares started teh year somewhere in the $30s or $40s, were around $10 on friday, and ended about $1 when Citi took 'em over--- I think the capital gains tax is not a high concern fo most folks right now)... and they should stay away from ALL of that sort of thought in this package. If we start inserting long run fixes to this mess in this short term rescue package they will REALLY fark things up divert all the discussion away from what is important here and now (not to mention insert all sorts of stupid reactionary garbage).

Focus on the immediate crisis in the "rescue" package. sorth the rest of it out later

[DirkFTW]

Hindsight is 20-20, but GOOD LORD, how wrong can these people be???

Are these people still in Congress?

[rabbitproof]

Augh, what else can you do to us, Bush?!?!?

http://www.theonion.com/content/vide...warn_anti_bush

[Flacolaco]

Well the Senate played like good little girls and boys and passed it.

So what does everyone think about Friday?

Should the house vote for this? Do you want your representative to vote for it?

[rabbitproof]

No!

Here's why: http://es.youtube.com/watch?v=t_LWQQrpSc4&fed

[ocelot_ark]

I've written my peeps and expressed to them my objection to the plan. But at this point, I don't even think it matters. I think it'll pass.

We are going to be paying for this one for decades. I want to know how in the WORLD we're supposed to "turn a profit" with the TARP when bank's can simply tell Paulson what their assets are worth now that FASB ruled on the mark-to-market rule shift. So they have a choice to say these are worth this inflated book/appraised value or the pennies on the dollar market price? Hmmm...I think i'll take option A, Alex.

So the taxpayers buy overvalued mortgages whose underlying collateral is vastly overstated. Great. Some sort of equity swap for participating institutions? I don't see how they'll effectively monitor the net losses to justify these when factoring time value of money, inflation, and the sheer VOLUME.

Maybe I just don't understand how the actual process will work. And don't even get me STARTED on our tax dollars going to bail out foreign investors. We're a frightened, fickle, sheep herd of a society.

[Flacolaco]

I agree that it's probably going to pass....but boy would I love to see the conservatives stand up and block it again. That would be something.

I realize something has to be done....but it's the same dang bill. it doesn't address the heart of the issue, it's still reckless, and everything they added besides the FDIC thing is a bunch of window dressing b.s.

[ocelot_ark]

Originally Posted by Flacolaco

I agree that it's probably going to pass....but boy would I love to see the conservatives stand up and block it again. That would be something.

I realize something has to be done....but it's the same dang bill. it doesn't address the heart of the issue, it's still reckless, and everything they added besides the FDIC thing is a bunch of window dressing b.s.

I don't agree with the FDIC increase. Where's that liquidity supposed to come from?

And I don't think something HAS to be done at all.

[Flacolaco]

Senator Tom Coburn, from Oklahoma:

“Taxpayers deserve to know that there is no guarantee this plan will work, but there is a guarantee that we will face a financial catastrophe if we do nothing. If banks continue to fail and stop lending the average American could lose their job, be unable to secure a loan for a car, home or college education, and find their life savings and retirement in jeopardy. Our economy depends on having liquid assets available for credit and lending just as an automobile engine needs oil. If those liquid assets stop flowing, our economy will be seriously damaged and will require far more costly and lengthy repairs.”

“This bill does not represent a new and sudden departure from free market principles as much as it represents an emergency response to congressional actions that have ignored free market principles, and our Constitution, for decades. If anyone in Washington should offer their resignation it should be the members of Congress who peddled the fantasy of free home ownership without risk. No institution in our country is more responsible for the myth of borrowing without consequences than the United States Congress.”

“As much as members of Congress want to find scapegoats, the root of this problem is political greed in Congress. Members of Congress from both parties wanted short-term political credit for promoting home ownership even though they were putting our entire economy at risk by encouraging people to buy homes they couldn’t afford. Then, instead of conducting thorough oversight and correcting obvious problems with unstable entities like Fannie Mae and Freddie Mac, members of Congress chose to ignore the problem and distract themselves with unprecedented amounts of pork-barrel spending.”

“Taxpayers who want to ensure that this doesn’t happen again should send a very clear message to Washington that it’s time for Congress to live within its means and restore the principles of limited government and free markets that made this country great. I will do everything in my power to ensure that this bill does not lead us down a slippery slope of European style socialism and slow economic growth. I will also promise taxpayers that I will do everything in my power to block what I expect will be hundreds of attempts by politicians in Washington to continue business-as-usual borrowing and spending in the next Congress. In a time of crisis, American families have to make hard choices between budget priorities. So should Congress. If politicians want to create new programs they should eliminate duplicative programs or reduce funding for less important programs. The only way we can put this crisis behind us is for Congress to rejoin the real world of budget choices and consequences which, as we have seen in recent days, can be ignored for only so long.”

link

There's a lot of gold in there....too bad he voted for the bailout.

[Mavdog]

I do not have any problem with the government acting as a middleman/clearinghouse for these securities being held, and if that were the only item in the bill it has my support.

but they couldn't help themselves and here are additional spending items and tax considerations added on....

what a mess.

[DirkFTW]

New RNC ad pointing fingers.

Sigh. Since the bailout passed, there doesn't seem to be much use in pointing fingers. Still, all I want to do is...

CHOKE MY MILLION BUCKS OUT OF THEM!!

[GermanDunk]

35-bn. rescue package for Hypo Real Estate was pulled today.
Hypo Real is the biggest european immobile-financier.


You can´t control what the bank do...
_____________________

[DirkFTW]

Dow below 10,000. Markets worldwide jittery. More US banks expected to fail...

Do we need another $700 billion? What the heck?? Way to accomplish nothing.

I might just go buy some gold bars and bury them in the back yard at this rate.

[rabbitproof]

Sigh.

Yeah, stuffing cash in tin cans under your bed isn't going to work anymore. Gold bars and diamonds.

[GermanDunk]

German car makers cut down car putput. BMW downcuts by 20-25k scheduled for USA-delivery.
GM-affiliate Opel completely closes the production for 3 weeks. Mercedes reduces by 45.000 units.

Mercedes announced significal decrease in demand for 8 and 12 piston models such as E & S Series and SUV ( M & G Class ), but 11.500 people ordered a "Smart " For two " " in September alone. 10 % rise compared to August.

SPIEGEL magazine

[DirkFTW]

So is now the best time to go buy a luxury German car?

[DirkFTW]

HAHAHAHA! I love Colbert!

Laughter is the best medicine! (Or at least it's the only thing I can do)

Hilarious SNL Skit about mortgage meltdown.

[GermanDunk]

Originally Posted by DirkFTW

So is now the best time to go buy a luxury German car?

Buying anticyclically is always the best choice. But maybe not concerning cars. Most germans can´t afford buying cars made in their own country. How patriotic conservative car makers are...

[DirkFTW]

BECAUSE I'M FREEEEEE

FREE FALLIN'!