Late Edition September 29 2008 at 02:59 PM Chi-Chu Tschang and Harry Maurer
No Thanks, Says the House
The House of Representatives tossed a bombshell into the global financial system this afternoon by voting down the bailout package negotiated by congressional and Administration leaders over the weekend. The vote was 228-205, with Republicans voting 2-to-1 to reject the plan.
Wall Street reacted with horror. The Dow, already well into negative territory all morning, briefly plunged to a loss of 705 points before rallying a bit as the final votes were tallied in the House. As of 3 p.m., the index was down nearly 600 points.
Source: Wall Street Journal
Shoppers Back Off
Understandably, U.S. consumers took a breather in August. The Commerce Dept. reports that personal spending stayed flat for the month after rising 0.1% in July, down from the initial 0.2% estimate. Personal income, however, rose at a seasonally adjusted rate of 0.5%, considerably better than economists' prediction of 0.2%. The Commerce Dept. also reported that a key inflation measure continiues to send worrisome signals. The personal consumption expenditures price index, while flat in August on a monthly basis, rose 4.5% over the year before. The core index, minus volatile food and energy, was up 2.6%, the highest since January, 1995.
Source: Wall Street Journal
Apple Gets Bruised
The Mac and iPhone maker saw its stock take a pounding after two analysts cut their ratings, predicting that Apple sales will slow as consumers pare back purchases for the rest of the year. The rout was set off by Kathryn Huberty of Morgan Stanley, who dropped her rating to equal-weight from overweight. At 3 p.m. Apple shares were down nearly 18%.
Source: MarketWatch.com
Lehman Sells Another Unit
The dismantling of Lehman Brothers continues apace. The bankrupt firm announced that it will sell its money-management business, including the lucrative Neuberger Berman asset-management unit, to private equity firms Bain & Co. and Hellman & Friedman for $2.15 billion. Bain and Hellman will create a new, independent firm called Neuberger Investment Management, run by Lehman and Neuberger veterans.
Source: New York Times
European Leaders Move Fast to Rescue Two Banks
Only days after a top EU official said he doubted Europe would broker U.S.-style financial bailouts, regulators moved swiftly over the weekend to contain spreading malaise and rescue two troubled banks, British mortgage lender Bradford & Bingley and Belgian giant Fortis. The British government will take over B&B's troubled $92 billion loan portfolio, while Spain's Santander will pick up its $36 billion retail and savings business. Fortis will be partly nationalized through a $16 billion collective bailout by the governments of Belgium, Luxembourg, and the Netherlands.
Source: New York Times, Reuters, Times of London
Germany's Hypo Real Estate in $50 Billion Bailout
In a further sign of spreading credit woes, German lender Hypo Real Estate, which has extensive exposure to the troubled U.S. and Irish mortgage markets, will be bailed out through the combined efforts of the German government and a group of private financial institutions.
Source: Wall Street Journal
Citigroup Nabs Wachovia
Citigroup and the Federal Deposit Insurance Corp (FDIC) announced a deal early on Sept. 29 to salvage the banking operations of Wachovia, the fourth-largest retail bank in the U.S. The FDIC will assume any debts from Wachovia above $42 billion, while Citi will give $12 billion in preferred stock and warrants to the federal agency.
Source: New York Times
ECB Aims to Boost Euro Zone Liquidity
The European Central Bank said Monday that it will make additional short-terms loans available to commercial banks in a bid to shore up liquidity in the 15-member eurozone.
Source: MarketWatch
Airbus Launches Push for Chinese Market
The European aircraft maker took the next step in its efforts to win greater share of the Chinese aviation market, opening a $600 million A320 assembly plant in China and vowing to source $1 billion in local components.
Source: The Guardian
EU Presses U.S. over 'Open Skies' Treaty
In the latest round of deregulation talks, the European Union pressed the U.S. to ease limitations on foreign ownership of American carriers, but the effort was inconclusive owing to the impending change in Administration.
Source: Wall Street Journal
Reality Bites for Dubai Property Market Boom
Fears are growing that Dubai's once-buoyant property market will be hit by the global liquidity crisis, as lenders in the oil-rich region become more cautious.
Source: Times of London
Conversation of the Day: Bailout--Deal or No Deal?
Reader All Together writes: "What if we all took a two-week moratorium? That should give the government enough time to make the right choice and not rush to make a bad decision."
Read the Story and Tell Us What You Think
Hot Topic on the Business Exchange: Social Networking
You've seen the term over and over, but what exactly are social networks? Who uses them, and why? Ron Casalotti and others are sharing their insights.
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