Late Edition September 23 2008 at 02:45 PM Chi-Chu Tschang and Harry Maurer
Paulson and Bernanke Make Their Pitch
In testimony before the Senate Banking Committee, Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke made an impassioned pitch for rapid passage of the Bush Administration's proposed $700 billion bailout of the financial industry. With the shape and fate of the bailout very much in play (see item below), Bernanke said "action by the Congress is urgently required to stabilize the situation," and Paulson noted that "I am convinced that this bold approach will cost American families far less than the alternative."
But the response from Banking Committee members mirrored divisions in Congress as a whole. Some condemned the bailout idea as wrong-headed, others said it must be pushed through quickly, and still others opined that while action was necessary, legislators must take time to weigh all the options. Wall Street seemed unsure what to make of the situation, with the Dow down around 75 points at 2:45 p.m., largely because of sinking prices for commodities producers and financial houses.
Source: CNNMoney.com
Oil Backs Off a Bit
After rising for a week, culminated by a $16-per-barrel jump yesterday, oil futures slid because of increased skepticism that the proposed bailout would revive growth in the U.S. Crude for November delivery was down nearly $5 a barrel, to $104.49, at around 1:30 on the New York Merc.
Source: Bloomberg
Nomura Buys Lehman's European Operations
Not content with snapping up Lehman Brothers' Asian unit yesterday, Nomura will also buy the firm's equities and investment banking business in Europe, saving a "significant proportion" of 2,500 jobs. Nomura didn't disclose how much it's paying. The deal will help it grab the scale needed to compete with global rivals.
Source: Financial Times
Electric Cars from Chrysler
Following GM's official unveiling of the Chevy Volt last week, Chrysler announced that it, too, will be selling electric-powered vehicles in 2010. The announcement was vague as to exact timing but said that among the vehicles Chrysler is working on is a Dodge sports car, a Jeep Wrangler, and a minivan.
Source: MotorTrend
A New CEO at Circuit City
Finally succumbing to pressure from unhappy activist shareholders, Philip Schoonover stepped down yesterday. James Markum will take over as interim president and CEO. Circuit City shares have been dropping fast, and the company has been looking for a buyer.
Source: BusinessWeek
Making Progress Toward a Bailout
U.S. Congressional leaders and the Bush administration are moving closer to agreement on a $700 billion plan to rescue the country's ailing financial services sector after the Treasury made concessions amid a backlash from economists and lawmakers. Politicians agreed to allow tougher oversight over the financial cleanup and provide assistance to homeowners facing foreclosure. Two key issues, though, remain unresolved: possible limits on executive compensation at firms taking advantage of the bailout and changes to bankruptcy rules that would let judges adjust the terms of mortgages. The two presidential candidates also entered the fray. Democratic Senator Barack Obama set out his own concerns in a speech that called for a modernization of financial regulation based on institutions' activities instead of their identification as banks or mortgage brokers. Republican Senator John McCain also voiced support for calls for an annual pay cap of about $400,000 for executives at companies bailed out with public funds -- a marked break from the Bush administration.
Source: Financial Times, Wall Street Journal
Global Markets Fall On Bailout Fears
Stocks in Europe and Asian fell on Sept. 23 -- led by financial companies and commodity producers -- on concerns that U.S. Treasury Secretary Henry Paulson's plan to buy $700 billion of bank assets wouldn't prevent a global recession. The proposal to stabilize the U.S. banking system may push the national debt to the highest level since 1954, which would threaten an erosion of foreign appetite for U.S. bonds, according to economists.
Source: Bloomberg
Limits on Exec Pay Hard to Enforce
Despite politicians' attempts to limit executive pay, compensation attorneys and experts say many of the restrictions could prove tough to enforce. Executive-pay restrictions have received considerable attention publicly and in negotiations on the Hill, but the draft bills include only short, vaguely worded sections that would require the U.S. Treasury to limit pay and severance for executives at companies from which it buys troubled assets, while giving the agency wide discretion over the details.
Source: BusinessWeek
Bailout Could Lead to Less Competition
The U.S. government's intervention in the financial markets is separating companies into two categories -- some are too big to fail while others are too small to bother rescuing. The result could lead to greater concentration of power, less competition, and higher prices, according to industry watchers.
Source: Washington Post
Financial Crisis Hits Retailers
Retailers are grappling with a sputtering economy and tight-fisted consumers. The credit crisis, though, has made it harder for shop-owners to finance their operations. Most retailers that are not already bankrupt have managed to buy their winter inventories, but that happened before Wall Street was brought to its knees.
Source: New York Times
Lehman Bond Investors Could Lose Billions
Investors owning Lehman Brothers bonds face potential losses of $110 billion due to sharp reductions in the value of assets that are likely to be left to be paid out to creditors. Further losses on the bankrupt investment bank's derivatives positions, which are still being unwound, could leave even less on the table for bond investors, according to traders. Despite the concerns, a number of former Lehman Brothers businesses reopened on Sept. 22 after a U.S. bankruptcy court approved their sale on Sept. 20 to British bank Barclays, but sales and trading businesses are not yet open.
Source: Financial Times, Reuters
Fed Loosens Banking Regulation
The U.S. Federal Reserve has loosened longstanding rules that limited the ability of buyout firms and private investors to take big stakes in banks. The move is an attempt to inject more cash into the nation's ailing banks and marks the latest attempt by the Fed to rewrite the rulebook in response to the financial crisis.
Source: Wall Street Journal
AIG To Sell Assets By Next Week
American International Group should have a list of assets it wants to sell by next week, according to its new chief executive. The New York-based financial giant, which was once the world's most valuable insurer, needs to raise cash quickly to repay an $85 billion U.S. Federal Reserve loan that allowed it to avoid bankruptcy after taking massive losses on mortgage derivatives.
Source: Reuters
Conversation of the Day: A Change To Find Balance
Reader Tglendening Writes: "Once we get to grips with the credit problem, we will still face a growing energy one. This is more difficult to solve."
Tell Us: Will Energy Issues Fall Off the Radar as Washington Scrambles to Rescue Wall Street?
Hot Topic on the Business Exchange: Lehman Bros.
As the credit crunch hits the U. S. economy, Lehman Brothers is fighting to survive as an independent entity. Shirley Brady and others are sharing their insights.
| This newsletter is a FREE service provided by BusinessWeek. To sign up for other newsletters, cancel delivery, change delivery options or change your e-mail address, please go to our Newsletter Preferences page. If you need other assistance, please contact Customer Service or contact: Wanda Cooper BusinessWeek Customer Rights Communications Data Services 1995 G Avenue Red Oak, IA 51566 Phone: 1-800-635-1200 View our corporate privacy policy . To learn more about how BusinessWeek applies this policy, you can contact our Marketing Department . Copyright 2007, by The McGraw-Hill Companies Inc. All rights reserved. Terms of Use | Privacy Notice |
No comments:
Post a Comment
Keep a civil tongue.