G.O.O.D

Source: breitbart.com

The governor of the Bank of Spain on Sunday issued a bleak assessment of the economic crisis, warning that the world faced a “total” financial meltdown unseen since the Great Depression.

“The lack of confidence is total,” Miguel Angel Fernandez Ordonez said in an interview with Spain’s El Pais daily.

“The inter-bank (lending) market is not functioning and this is generating vicious cycles: consumers are not consuming, businessmen are not taking on workers, investors are not investing and the banks are not lending.

“There is an almost total paralysis from which no-one is escaping,” he said, adding that any recovery — pencilled in by optimists for the end of 2009 and the start of 2010 — could be delayed if confidence is not restored.

Ordonez recognised that falling oil prices and lower taxes could kick-start a faster-than-anticipated recovery, but warned that a deepening cycle of falling consumer demand, rising unemployment and an ongoing lending squeeze could not be ruled out.

“This is the worst financial crisis since the Great Depression” of 1929, he added.

Ordonez said the European Central Bank, of which he is a governing council member, would cut interest rates in January if inflation expectations went much below two percent.

“If, among other variables, we observe that inflation expectations go much below two percent, it’s logical that we will lower rates.”

Regarding the dire situation in the United States, Ordonez said he backed the decision by the US Federal Reserve to cut interest rates almost to zero in the face of profound deflation fears.

Central banks are seeking to jumpstart movements on crucial interbank money markets that froze after the US market for high-risk, or subprime mortgages collapsed in mid 2007, and locked tighter after the US investment bank Lehman Brothers declared bankruptcy in mid September.

Interbank markets are a key link in the chain which provides credit to businesses and households.

Technorati Tags: Bank of Spain

Source: globalresearch.ca

It pains me deeply to announce that, despite the massive government rescue, yesterday’s collapse of Citigroup could ultimately lead to a shutdown of the global banking system.

For many years, I hoped this would never happen, and I thought we might be able to avoid it.

…

More recently, in the wake of the biggest financial failures in history — Bear Stearns, Lehman Brothers, Washington Mutual, Wachovia and others — rather than liquidate the failed firms’ bad assets, the authorities have been engineering shotgun mergers. The end result is that they have been sweeping most of the bad assets under the carpet of larger banks like Bank of America, Citigroup, and JPMorgan Chase, each of which already had abundant bad assets of its own. Adding insult to injury, Treasury Secretary Paulson’s decision this month — not to buy up the bad assets from many of these banks — has only heightened this concern. Rather than dispose of the toxic waste, the regulators have been rolling up the garbage to the larger banks.

And now, here we are, nearing the end of the road with the largest banks of all endangered and with no larger bank that can swallow them up. It’s a day of reckoning that leaves me no choice but to issue this three-part warning:

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Despite the U.S. government’s massive Citigroup bailout, it is going to be difficult for the global banking system to survive the shock to confidence for very long.

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Even if insured depositors do not pull out their funds, uninsured institutional investors are likely to run with their money, threatening to bring the system down.

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And alas, even if you have your money in a safe bank with full FDIC coverage, you could be adversely impacted.

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Technorati Tags: Citigroup

Source: Wikileaks

• lehman-summer-internship.pdf (click to view full file)
• lehman-summer-internship.pdf (alternative address)

“Come out of her my people…”

Source: CNN.com

The venerable Lehman Brothers, investment bank said early Monday that it will file for bankruptcy, while Bank of America unveiled plans to buy Merrill Lynch — two pieces of news that profoundly alter the American financial landscape.

The fast-paced changes capped a roller-coaster Wall Street weekend and threatened to stir up U.S. financial markets already reeling from woes at other major financial firms and mortgage financing titans Fannie Mae and Freddie Mac.

“This crisis is clearly deeper than anybody had imagined only a short time ago,” Peter Stein, an associate editor at The Wall Street Journal in Asia, told CNN.

Lehman Brothers said in a statement early Monday that it plans to file for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. The 158-year-old investment bank had been undermined by bad bets on real estate — the value of its shares declined 94 percent this year.

The fall of Lehman followed a wild, three-day scramble by top Wall Street executives and federal regulators, who worked around the clock to come up with a solution to a still-unfolding financial crisis.

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Source Reuters

Bank of America Corp said it agreed to buy Merrill Lynch & Co Inc in an all-stock deal worth $50 billion, snagging the world’s largest retail brokerage after one of the worst-ever weekends on Wall Street.

The deal came after tense negotiations over the fate of Lehman Brothers Holdings Inc, which triggered concern that market participants would lose faith in other investment banks. Lehman said early on Monday that it would file for Chapter 11 bankruptcy protection.

“It catapults Bank of America into positions of strength in three businesses where they were weak,” said James Ellman, portfolio manager at hedge fund Seacliff Capital.

“Now Bank of America has one of the best and largest retail brokerages in the country, one of the top investment banks in the world, and a large stake in one of the best investment managers in the world,” Ellman said.

Bank of America agreed to pay 0.8595 shares of Bank of America common stock for each Merrill Lynch share. The price is 1.8 times stated tangible book value.

The bank is buying about $44 billion of Merrill’s common shares, as well as $6 billion of options, convertibles, and restricted stock units.

Bank of America said it expects to achieve $7 billion in pretax expense savings, fully realized by 2012, and expects the deal to be accretive to earnings by 2010. The transaction is expected to close in the first quarter of next year.

The price, which comes to about $29 per share, represents a 70 percent premium to Merrill’s share price on Friday, although Merrill’s shares were trading at $50 in May and over $90 at the beginning of January 2007.

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