Monday, September 29, 2008

Bailout Plan Back on Track?

WASHINGTON — House and Senate negotiators worked out a tentative deal with the White House late Saturday on a $700 billion plan to rescue the teetering financial sector from the worst financial crisis since the Great Depression, with an eye toward a House vote Monday and Senate action to follow. A bipartisan coalition including House Speaker Nancy Pelosi, D-Calif., Senate Majority Leader Harry Reid, D-Nev., Treasury Secretary Henry Paulson and House Republican Whip Ray Blunt, R-Mo, announced the agreement after midnight in the Capitol, capping a marathon negotiating session that began in early afternoon. The lawmakers, eager to get a deal in place before financial markets open Monday, emphasized that their agreement still had to be translated into legislative language and presented to lawmakers for sign off. Staff was told to work through the night to finish the necessary paperwork. The plan would allow the Treasury Department to buy troubled mortgage-backed securities and other loans held by financial institutions. The government could later resell the assets, presumably after they'd recovered much of their value. The proposal is designed to restore market confidence, set a floor under asset prices and allow bank capital and credit to flow again, unlocking critical gears of lending for the economy.

The compromise plan will keep the basic Treasury Department framework. But the Bush administration would get only the first $350 billion of the money up front, and the rest would be contingent on congressional action. The deal would include limits on compensation to executives whose firms benefit from government assistance, which Sen. Kent Conrad, D-N.D., said was one of the thorniest issues lawmakers and the administration faced during their hours-long negotiating session. Conrad said lawmakers wanted to prevent golden parachutes — big bonsues to executives of the type who crash their company, then sail off into the sunset. The legislation would place "reasonable" limits on severance packages for executives of companies that benefit from the rescue plan. It would affect fired executives of financial firms, and executives of firms that go bankrupt.

The House braced for a difficult vote set for Monday on a $700 billion rescue of the financial industry after a weekend of tense negotiations produced a plan that Congressional leaders portrayed as greatly strengthened by new taxpayer safeguards. The 110-page bill, intended to ease a growing credit crisis, came after a frenzied week of political twists and turns that culminated in an agreement between the Bush administration and Congress early Sunday morning. The measure still faced stiff resistance from Republican and Democratic lawmakers who portrayed it as a rush to economic judgment and an undeserved aid package for high-flying financiers who chased big profits through reckless investments.

GM, Ford and Chrysler are seeking up to $50 billion in low-interest government-backed loans, double the $25 billion approved last year as part of an energy bill. The U.S. auto industry, wracked by unexpectedly high gas prices this year, has found itself once again producing the wrong models at the wrong time. Repeating a historically embarrassing inability to predict consumer preferences, the U.S. Big 3 are flush with an inventory of SUVs and large pickup trucks at a time when consumers are begging for smaller European-style minivans and more fuel-efficient vehicles, including hybrids. Last week, U.S. News & World Report suggested the $25 billion loan-guarantee bailout for the Big 3 automakers may be passed by Congress and signed by President Bush as early as this weekend.

  • JJ Commentary: This so-called “bailout” is like putting a band aid on Hoover Dam. The underlying problem of too much debt (a function of greed) remains – and is even exacerbated by the bailout.

Citigroup to Buy Wachovia's Banking Operations

Citigroup will buy banking giant Wachovia in a deal brokered by the Federal Deposit Insurance Corp., the FDIC said Monday. The FDIC emphasized that Wachovia didn't fail and that all depositors are protected. The transaction won't require any funds from the FDIC's deposit insurance fund, the agency said. The FDIC said it has entered into a loss-sharing arrangement on a pre-identified pool of loans under which Citigroup will absorb up to $42 billion of losses on a $312 billion pool of loans. Citigroup also will grant the FDIC $12 billion in preferred stock and warrants. Wachovia's financial problems stem from its acquisition of Golden West Financial in 2006 for roughly $25 billion. With that purchase, Wachovia inherited a deteriorating $122 billion portfolio of "pick-a-payment loans," which let borrowers skip some payments. Concerns about Wachovia's financial health have hammered the company's stock in recent days.

European Bank Giant Fortis Partially Nationalized

BRUSSELS — Dutch-Belgian bank and insurance giant Fortis NV was given a $16.4 billion lifeline to avert insolvency as part of a wider bailout plan agreed to by Belgium, the Netherlands and Luxembourg, officials said Sunday. Belgium's Prime Minister Yves Leterme said the bailout shows account holders and investors that Fortis will not be allowed to fall victim to the global credit crisis. Under the bailout, Belgium will invest $6.88 billion and the Netherlands $5.86 billion in Fortis' banking operations in the two countries. In return, they each receive 49% ownership in those national arms of the bank. Luxembourg will invest $3.6 billion in the bank's Luxembourg operations, also for a 49% stake.

British Lender’s Assets to be Sold, Nationalized

LONDON — The troubled British mortgage lender Bradford & Bingley will be nationalized and sold off in parts, with Spanish banking giant Santander SA taking over its retail deposits and branch network, British media reported Monday. The British government is likely to take on the bank's toxic loans and fold them into Northern Rock, a mortgage lender nationalized by the British government in February. The BBC said the Treasury will then try to sell the company's 200 branches and savings business to other banks.

U.K.'s Brown Wants New Global Financial Order

UNITED NATIONS (AP) — British Prime Minister Gordon Brown called Friday for "a new global financial order" to resolve the financial crisis currently roiling world markets. In his address before the U.N. General Assembly, Brown said the world was facing the "first real financial crisis" of the global era and that it required an international solution. "The international institutions created in the aftermath of World War II have not kept pace with the changing global economy. We need national regulators to be cooperative, rules and principles to be consistent and international movements of capital to be transparent," Brown said. He said the immediate priority was to stabilize financial markets and then work to rebuild the world financial system around clear principles, including increased transparency, regulation, responsibility and global oversight of international capital flows.

  • JJ Commentary: Spoken like a true New World (Dis)Order leader.

Tight Credit Becomes Problem for Small-Business Owners

As lawmakers debate the proposed financial bailout bill, small-business owners — who are especially vulnerable to financial meltdowns — face even tighter credit than usual. They're tapping credit cards and personal savings as it gets harder to land bank financing. They appear to be hoarding their cash, anticipating worse economic times. And unless the rescue bill frees up credit, they'll likely find it harder to get federally guaranteed loans. Small businesses employ 116 million workers and crank out half of the U.S. gross domestic product, says the Commerce Department. So if their credit woes worsen, the effects will be widespread. Year to date, Small Business Association loans to small businesses have plummeted compared with the same period last year.

U.N.: Iran on Path to Build Atomic Weapon

BERLIN (AP) — The head of the U.N.'s nuclear watchdog has warned that Iran is one of several countries on the path to possessing the ingredients for making a nuclear weapon, according to a German newspaper report Friday. Israel says the Islamic Republic could have enough nuclear material to make its first bomb within a year. The U.S. estimates Tehran is at least two years away from that stage. But some analysts have suggested Iran may be closer. David Albright — whose Washington-based Institute for Science and International Security tracks suspect secret proliferators — said Tehran could reach weapons capacity in as little as six months through uranium enrichment. A recent IAEA report says Tehran has increased the number of centrifuges used to process uranium to nearly 4,000, from 3,000 just a few months ago.

Venezuela to Build Nuclear Technology with Russian Assistance

CARACAS, Venezuela (AP) — President Hugo Chavez said Sunday that Russia will help Venezuela develop nuclear energy — a move likely to raise U.S. concerns over increasingly close cooperation between Caracas and Moscow. Putin offered Chavez assistance in developing nuclear energy during a meeting in the Russian city of Novo-Ogaryovo last week. The prime minister did not specify what kind of cooperation he could offer Venezuela, but Russia is aggressively promoting itself as a builder of nuclear power plants in developing nations. Russia has ramped up its cooperation with Venezuela since last month's war with Georgia, which badly damaged Moscow's already strained ties with the West, particularly the United States.
  • JJ Commentary: Russia is busy re-establishing its “cold war” support of socialistic, totalitarian countries (e.g. Iran) in fulfillment of its prophesied end-time role.

28 Die in Latest Pakistan Attacks

ISLAMABAD, Pakistan (AP) — Pakistani security forces pounded militant positions near strategic areas in a tribal region bordering Afghanistan, killing 25 suspected insurgents in a new round of a military offensive that also left three soldiers dead, the army said. The battle in the Bajur tribal region came as the nuclear-armed U.S. anti-terror ally struggles to recover from a massive suicide attack at the Marriott Hotel in the capital. Police said Saturday the death toll from the blast a week ago in Islamabad has risen to 54, one higher than previously reported. The weeks-long military operation in Bajur has already killed more than 1,000 militants and some 66 soldiers, and officials say it could be another two months before the militant stronghold is stabilized.

KABUL, Afghanistan (AP) — Fighting between Pakistani troops and militants in a tribal region has forced some 20,000 Pakistanis to seek refuge across the border in eastern Afghanistan, the U.N.'s refugee agency said Monday. Nearly 4,000 families have fled Pakistan's Bajur tribal agency into Afghanistan's Kunar province. Bajur is the most northerly of Pakistan's wild tribal regions, several of which have fallen largely under the control of militants opposed to the Afghan and Pakistani governments. Most have found shelter with relatives across northwestern Pakistan, though about 100,000 have taken refuge in camps set up by Pakistani authorities. Pakistan's border region is considered a likely hiding place for al-Qaeda leader Osama bin Laden.

Explosion in Syria Kills 17

BEIRUT (AP) — A car bomb struck a crowded residential street in the Syrian capital of Damascus on Saturday, killing 17 people and injuring 14 others, Syrian television reported. A car packed with 440 pounds of explosives blew up in a southern neighborhood near the junction to the city's international airport, shattering car and apartment windows, TV reported. The charred booby-trapped car was seen sitting in the street near a primary school as firefighters stood near a wide crater believed be caused by the blast. Syrian Interior Minister Bassam Abdul-Majid called the bombing a "terrorist act" and said all the victims were civilians. Anti-terror units were investigating. Such bombings are rare in Syria, a tightly controlled country where the regime of President Bashar Assad has used heavy-handed tactics to crack down against dissent and instability. But over the nine months, the country has witnessed two major assassinations. The secular government also says it is battling Sunni Muslim militants who have carried out several bombings and attacks in recent years.

World's Carbon Dioxide Emissions Rising at 'Scary' Rate

The world pumped up its pollution of the chief man-made global warming gas last year, setting a course that could push beyond leading scientists' projected worst-case scenario, international researchers said Thursday. The new numbers, called "scary" by some, were a surprise because scientists thought an economic downturn would slow energy use. Instead, carbon dioxide output jumped 3% from 2006 to 2007. That's an amount that exceeds the most dire outlook for emissions from burning coal and oil and related activities as projected by a Nobel Prize-winning group of international scientists in 2007. Meanwhile, forests and oceans, which suck up carbon dioxide, are doing so at lower rates than in the 20th century, scientists said. If those trends continue, it puts the world on track for the highest predicted rises in temperature and sea level. The pollution leader was China, followed by the USA, which past data show is the leader in emissions per person in carbon dioxide output. And while several developed countries slightly cut their CO2 output in 2007, the USA churned out more.

Weather Signs

HOUSTON — More than half a million children in the nation's fourth-largest city and on the Texas Gulf CoastHouston — the biggest school district in Texas — and all of the Galveston schools remained closed Friday, September 26th. Most Houston schools will reopen on Monday. Officials have been drying soggy carpets and wall maps and airing out moldy library books. Fallen trees are being removed and the fences around schoolyards repaired. While a few Galveston schools will open next week, many are serving as shelters for people made homeless by the storm, while others are too damaged to use any time soon. have been out of school since the Sept. 13 storm (Ike) brought life to a standstill. About 20% of schools in

WINNIE, Texas (AP) — Bolivar residents crowded onto the only roadway into the peninsula on Friday. They were allowed to check out the massive wreckage left behind after Hurricane Ike roared through this thin strip of land along the Gulf of Mexico. The peninsula's 4,000 or so residents were allowed back on a "look and leave" policy. Officials said the area is not safe to live in because of a lack of water and utilities as well as dangers from snakes and alligators. Terrie Robbins expected to find storm damage when she and other residents were allowed to return home on Bolivar Peninsula for the first time Friday since fleeing Hurricane Ike. But she didn't expect to find her home more than 500 feet from its concrete foundation, dumped next to a bar across the main highway that runs through the peninsula. She said she was lucky. Her parents, who live two streets away, weren't even able to locate their home. "We survived (Hurricanes) Carla and Alicia. Just not Ike. Ike was more powerful," said Robbins' sister, Kellie Collins.

ATLANTA — A storm-related gas shortage in the Southeast that has left some places bone-dry and others with two-hour gas lines is expected to continue for at least another two weeks, energy experts and industry officials say. The shortage began two weeks after Hurricane Gustav hit the oil-refining regions of the Gulf Coast on Sept. 1. Operations that shut down before that storm were just coming back online when Hurricane Ike hit, forcing another shutdown. The gas shortage, now in its third week, is particularly acute here in sprawling Atlanta, in Nashville in parts of the Carolinas and in Anniston, Ala.

BEIJING (AP) — Flash floods and landslides unleashed by heavy rains have killed 16 people in one of the areas hit hardest by the massive May earthquake in China's Sichuan province, the local government said Friday. About 20,000 people affected by the floods were evacuated and have been moved to safer places and given food and water, the city's Communist Party propaganda department said in a statement. The flooding and landslides since Wednesday also have left 48 people missing and 360 people injured in Sichuan's Mianyang city, the agency said. More than 42,000 houses have been destroyed.

UNITED NATIONS (AP) — Haiti's president implored leaders at the U.N. General Assembly on Friday to commit to long-term solutions to help his nation after a series of hurricanes and tropical storms killed hundreds. President Rene Preval said it will take years to recover from the four killer storms that wiped out at least 60% of Haitian agriculture and destroyed roads, bridges and homes across the country in late August and early September. At least 425 people were killed in the storms. Officials said more than 800,000 people in the country of 9 million were left needing food, water or shelter, including more than 300,000 children.

U.S. Cases of West Nile Virus Decline

ATLANTA (AP) — The West Nile virus season is on track to be the mildest in seven years, with less than a third the number of serious cases as last year's total, U.S. health officials said. As of Tuesday, there were 368 severe cases, with 18 deaths, according to preliminary reports. Mississippi and California were hardest hit, together accounting for nearly half the cases. Most West Nile infections are reported in August and September, so health officials believe the worst of the season is probably over. It's not clear why this season has been so mild, said officials at the Centers for Disease Control and Prevention. It's the fewest cases since 2001, when the mosquito-borne virus was still emerging in the United States and was only reported in 10 states. Mosquitoes often pick up the virus from birds they bite and then spread it to people. Perhaps the weather in some areas of the country was not as favorable for mosquito-breeding as in years past, some experts said.

Friday, September 26, 2008

Bailout Plan Falters

WASHINGTON — No one said it would be easy. Despite unprecedented calls for quick action, the White House's $700 billion plan to rescue the financial industry appeared to fall apart late Thursday, less than 12 hours after a market-soothing deal seemed likely. A convergence of financial concerns, presidential politics and partisan rancor created an unexpected Washington drama with the nation's economic future hanging in the balance. House Financial Services Committee Barney Frank, D-Mass., accused House Republicans of refusing to negotiate in good faith and told President Bush "to go to work" to find GOP votes needed to pass the plan. At one point Thursday, a somber Treasury Secretary Henry Paulson kneeled before Democrats at the White House while urging them not to publicly criticize Republicans — and risk sending the financial markets plunging.

Meanwhile, Republican presidential nominee John McCain issued a statement acknowledging that a bipartisan White House meeting he appeared to have sought to help showcase his leadership skills on the economy had devolved into a "contentious shouting match." Tension over the competing plans boiled over during the White House meeting among congressional leaders, President Bush, McCain and Illinois Sen. Barack Obama, McCain's Democratic opponent in the presidential race. What had seemed like it could be a triumphant moment of bipartisan problem-solving ended with the participants scattering, with no formal announcements and with signs of deep discord.

  • JJ Commentary: The “third horseman” (third seal, Revelation 6:5) is riding in earnest now

Bank Failures Continue

WALL STREET JOURNAL — In what is by far the largest bank failure in U.S. history, federal regulators seized Washington Mutual Inc. and struck a deal to sell the bulk of its operations to J.P. Morgan Chase & Co. The collapse of the Seattle thrift, which was triggered by a wave of deposit withdrawals, marks a new low point in the country's financial crisis. But the deal, as constructed by the Federal Deposit Insurance Corp., could hold some glimmers of hope for the beleaguered banking system because it averts any hit to the bank-insurance fund. Instead, J.P. Morgan agreed to pay $1.9 billion to the government for WaMu's banking operations and will assume the loan portfolio of the thrift, which has $307 billion in assets. The full cost to J.P. Morgan will be much higher, because it plans to write down about $31 billion of the bad loans and raise $8 billion in new capital. All WaMu depositors will have access to their cash, but holders of more than $30 billion in debt and preferred stock will likely see little if any recovery.

The failure of WaMu eclipsed what had long been America's largest bank bust on record, the 1984 collapse of Continental Illinois, which had $40 billion in assets. The fact that no bank was willing to buy WaMu until it failed shows how badly confidence has eroded in a banking system awash with record profits just a few years ago. Faced with deepening losses on mortgages, credit cards and other loans, big and small banks across the country are struggling with what many bank executives say is a crisis far deeper than the savings-and-loan debacle. As of June 30, WaMu had more than 43,000 employees, more than 2,200 branch offices in 15 states and $188.3 billion in deposits.

NEW YORK/LONDON (REUTERS) — Banks and money managers borrowed a record amount from the Federal Reserve in the latest week, nearly $188 billion a day on average, showing the central bank went to extremes to keep the banking system afloat amid the biggest financial crisis since the Great Depression. The data on borrowing from the Fed closed out another day of high anxiety in global money markets. Key measures of funding stress hit record levels on both sides of the Atlantic as nervous market participants awaited developments from Washington on a $700 billion financial bailout plan. Federal Reserve data showed Thursday the total amount banks borrowed nearly quadrupled the previous record of $47.97 billion per day notched just the week before. "This looks like the balance sheet of a central bank that is keeping the financial system on life support," said Michael Feroli, U.S. economist with JPMorgan in New York.

Foreclosures to Persist

Not even one of the biggest government bailouts in history will immediately turn back the flow of home foreclosures and falling housing prices. Housing experts say foreclosures are likely to remain above historical norms until at least next summer as mortgages reset and home prices in some areas of the country continue to fall. One worry: Delinquencies, already a growing problem for subprime borrowers, are rising among prime mortgage borrowers. Nationally, foreclosures rose 12% in August from the month before and were up 27% from the year before, according to RealtyTrac. More than 2 million foreclosures on homes financed with subprime loans are anticipated from late 2008 to the end of 2009, according to the Center for Responsible Lending. An additional 40.6 million homes will drop in value because they are near foreclosed homes.

Economy Continues to Weaken

WASHINGTONOrders for big-ticket items plunged at the fastest rate in seven months in August while the pace of new-homes sales dropped to its lowest level in more than 17 years, the government said Thursday in separate reports. The reports underscored the weakness in the economy going into the financial turmoil that rapidly escalated in September. Orders for durable goods, long-lasting items like cars and refrigerators, dropped 4.5% in August as demand for machinery, cars, aircraft and other items fell, the Commerce Department said. The news did not bode well for the manufacturing sector, which has fared OK this year as strong export demand has cushioned the blow of the deteriorating domestic economy. But Federal Reserve Chairman Ben Bernanke warned this week that export growth will likely ease given softening economies abroad.

Pork Still King

WASHINGTON — A $630 billion spending bill nearing final approval in Congress includes $6.6 billion for thousands of lawmakers' pet projects, including $51.5 million requested by Democratic vice presidential nominee Joe Biden when both presidential candidates have sworn off seeking any money. Taxpayers for Common Sense analyzed the 2,321 special-interest items called "earmarks" in the spending bill. The legislation is a temporary measure that would fund the government through March, rather than October 2009, when the next fiscal year ends. It combines spending bills for the Departments of Defense, Homeland Security and Veterans Affairs, as well as nearly $30 billion in disaster relief for flood and hurricane victims and up to $25 billion in loans to automakers. Both presidential candidates, Republican John McCain and Democrat Barack Obama, have criticized earmarks. McCain, who doesn't request earmarks, has said that as president, he would veto any bill containing them. Since joining the Senate in 2005, Obama has requested $860.6 million in earmarks, according to the taxpayer group, but none this year, and he has pledged to reduce them if elected president.

Chinese Food Scandal Spreads

HONG KONG (AP) — Hong Kong supermarkets stripped shelves of a popular cookie brand made in China on Friday after it and Macau authorities found traces of the industrial chemical melamine in Chinese-made baby cereal and crackers. It said in a statement Friday that it has found melamine in Heinz DHA+AA vegetable formula baby cereal and in steamed potato wasabi crackers produced by Silang House. It says both products were made in mainland China. Hong Kong's removal of the chocolate-filled cookies came after Macau's Health Bureau found Thursday the amount of melamine in the Koala's March brand was 24 times the safe limit. China's food safety crisis started with melamine-tainted infant formula, but has spread to dairy and other food products. Most recently, tests in Hong Kong and SingaporeChina.confirmed a famous Chinese candy brand was tainted. Melamine-laced milk has been blamed for the death of four babies and sickened more than 50,000 children in mainland

BEIJING (AP) — The European Union banned imports of baby food containing Chinese milk Thursday as a toxic chemical that was illegally added to China's dairy supplies turned up in candy and other Chinese-made goods that were quickly pulled from stores worldwide. The 27-nation EU adds to the growing list of countries that have banned or recalled Chinese dairy products because of the contamination. All European Union imports of products containing more than 15% of milk powder will have to be tested under the new rules due to come into force Friday.

'Greening' Disease Threatens the Core of U.S. Citrus Crops

A botanical disease that has hit Florida and now threatens California is raising fears that the price of citrus fruits and juices will soar in coming years. Government agencies and the produce industry are working to stop the spread of "citrus greening." Discovered in China in the 1800s, the disease has a global history of devastating crops. "Areas that have had greening no longer have a commercial citrus industry," says Robert Norberg, an economist with the Florida Department of Citrus. It's already "a 10" on a threat scale of 1 to 10 in Florida, says Andrew Meadows of Florida Citrus Mutual, a growers' organization. "It is the biggest issue the industry is facing right now. It is killing trees as we speak."

  • JJ Commentary: End-time pestilence is also increasing.

Pakistani Turmoil

KHAR, Pakistan (AP) — Security forces backed by helicopter gunships and artillery killed more than 60 insurgents in northwest Pakistan in offensives aimed at denying al-Qaeda and Taliban militants safe havens, officials said Tuesday. The attacks come amid intense U.S. pressure on Pakistan to crack down on militants blamed for attacks both at home and on coalition forces in neighboring Afghanistan. A truck bombing over the weekend at a luxury hotel in the capital Islamabad that killed 53 people underscored the threat extremists pose to the nuclear-armed nation.

New World (Dis)Order

On Wednesday, finance chiefs of five of the six-member, oil-rich Gulf Cooperation Council approved a proposal to create a monetary union as a move toward adopting a single currency. The six Islamic states constituting the Gulf Cooperation Council are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. Oman pulled out of the agreement last year.Five states in the compact have agreed to set 2010 as the target date for the creation of a monetary union and the adoption of common currency. The emergence of an Islamic single currency among these oil-rich Middle Eastern countries marks a significant step in the emerging worldwide movement to abandon national currencies in favor of regional currencies, along the model where the EU states have abandoned their national currencies in favor of the European Central Bank and the euro. In 2002, the finance ministers of the Gulf Cooperation Council states sought out the assistance of the European Central Bank, as the model for their single currency, according to BBC reports. The monetary union will entail the creation of a central bank to issue the single currency.

State Department Reports on Religious Freedom

Religion news service reports that the U.S. State Department, in its annual report on international religious freedom issued last Friday, admonished several Asian nations, including China, for severely repressing religion. Listing "countries of particular concern" that engage in or tolerate "particularly severe violations of religious freedom," the report highlights: Myanmar (formerly Burma), China, Eritrea, Iran, North Korea, Saudi Arabia, Sudan and Uzbekistan. Compiled by diplomats and human rights activists every year since 1999, the 800-page report covers 198 countries and territories and is mandated by federal law. China's repression of religious freedom intensified in the last year, the report said, as churches were closed, foreigners detained, Falon Gong practitioners arrested and possibly killed, Muslims prohibited from taking the hajj to Saudi Arabia, and Buddhist monks were forced to undergo "patriotic education" campaigns, according to the report.

Monday, September 22, 2008

Economy (The Third Horseman)

WASHINGTON (AP) — The Bush administration is asking Congress to let the government buy $700 billion in toxic mortgages in the largest financial bailout since the Great Depression, according to a draft of the plan obtained Saturday by The Associated Press. The plan would give the government broad power to buy the bad debt of any U.S. financial institution for the next two years. It would raise the statutory limit on the national debt from $10.6 trillion to $11.3 trillion to make room for the massive rescue. The proposal does not specify what the government would get in return from financial companies for the federal assistance. The White House and congressional leaders hoped the developing legislation could pass as early as next week. The plan is designed to let faltering financial institutions unload their bad debt on the government, and in turn the taxpayer, in a bid to avoid dire economic consequences.

To get the money to buy up the bad mortgage loans that have threatened to bring the financial system to its knees, the government will have to borrow. And that borrowing will come at a time when the federal budget deficit is already soaring. The deficit for this budget year, which ends Sept. 30, is expected to rise to $407 billion, more than double the $161.5 billion imbalance for 2007, reflecting what the economic slowdown and this year's $168 billion economic stimulus program are already doing to the government's books. Treasury Secretary Henry Paulson is resisting calls from Congress to add additional help for households to the $700 billion financial system rescue bill.

  • JJ Commentary: More and more debt is not the solution. Debt is the problem, which is now growing worse and worse.

In their bold response to the deepening financial trauma, the Federal Reserve and U.S. Treasury Department appear to have tossed aside the playbook that guided official thinking on the economy for three decades. Throughout more than a decade of recurrent crises in nations such as Mexico, Russia and Thailand, the United States offered the same advice: Let the market solve the problem and get the government out of the way. Even when the consequences of such economic "tough love" included widespread joblessness, soaring poverty and domestic turmoil, Washington insisted on the rule that the market knew best. Now that it's the United States battling financial conflagration, it turns out there are exceptions to that rule. Such as Uncle Sam's takeover of AIG, the world's largest insurance company. Such as the quasi-nationalization of mortgage giants Fannie Mae and Freddie Mac. Such as putting $29 billion of taxpayer money at risk to facilitate JPMorgan Chase's acquisition of investment bank Bear Stearns "We're not doing what we preached," says economist Sung Won Sohn of California State University.

WASHINGTON — It is the end of an era on Wall Street, as the Federal Reserve granted permission for the last two major investment banks — Goldman Sachs and Morgan Stanley — to become bank holding companies in order to stay in business. And early Monday, Morgan said it will "pursue a strategic alliance" with Japan's Mitsubishi UFJ Financial Group in which Mitsubishi would own up to 20% of Morgan Stanley. The Fed announced late Sunday that it had approved the request, which will allow Goldman and Morgan Stanley to create commercial banks that can take federally insured deposits, bolstering the resources of both institutions. The change is the latest seismic shift on Wall Street. The change of status means both companies will come under the direct regulation of the Fed, which oversees the nation's bank holding companies.

  • JJ Commentary: That’s just what the Fed wants, more control. By the way, the Federal Reserve is not really a federal institution. Its board of governors is privately appointed and run. Only the Chairman is appointed by the government.

Foundations and non-profit groups that invest in the stock market are getting battered by recent Wall Street volatility. Hardest hit are community groups that rely on both endowments and donations, which are also expected to decline. The survey showed that 52% of the community foundations that responded said they plan to distribute less grant money next year because of the economic downturn.

WASHINGTON — Finance officials from the globe's major economic powers pledged Monday to do all they can to fight a worsening credit crisis that threatens the world's economic health and stability. The Group of Seven said they welcomed the extraordinary steps by the United States to stem the crisis, including a plan where the Treasury Department would buy bad mortgages and other toxic assets held by banks and other financial institutions. Besides the United States, the Group of Seven is made up of Japan, Germany, France, Britain, Italy and Canada. The group didn't offer specifics about what actions they might take. But they sought to send a reassuring message that they are on top of the situation.

Weather Signs

GALVESTON, Texas (AP) — One week after Hurricane Ike wiped out whole neighborhoods and nearly every basic service in Galveston, there is a plan to start letting some 45,000 evacuees back to their hobbled hometown. Those who left heeded dire warnings to flee. Now they've been given a new warning: Going home won't be easy. No power, limited sewer services and spotty water utilities are among the trials that city officials say could await residents when a gradual reopening of Galveston begins next week. "You will need to decide if you want to come back in those conditions," city manager Steve LeBlanc said Friday. Residents will be allowed to return in phases, starting from the least damaged areas.

Shrimpers and oystermen lost their boats to the muck. Tourist areas on the coast that should be bustling at the start of convention season are flattened. Lingering power outages are keeping offices empty and restaurants closed from Texas through the Midwest. It will take months or more to tally Hurricane Ike's financial toll, but one thing is clear: Almost nobody in its path escaped unscathed. The storm carried hurricane-force winds as far north as Kentucky — which suffered its widest power outage in history — and driving rain clear into New England. More than 500,000 people remained without power Friday in Kentucky and Ohio; schools in Louisville, were to open Monday after Ike closed them for a week.

In Texas, power has been restored to more than half the customers who lost electricity during the storm. The fuel industry reports that more than 75% of retail stations have resumed operations and nearly 100% of terminals were operating. Ike crashed ashore last weekend near the mouth of Galveston Bay, which produces about 15 million pounds of seafood each year. Shrimpers and oystermen there will practically have to start over. Even those who can salvage their trawlers will have to cope with the carpet of debris Ike dumped on the floor of the Gulf of Mexico. However, in Houston, where the booming energy industry has kept the nation's fourth-largest city economically stable in a nationwide slump, the outlook was downright positive. The city's port survived with minimal damage, and the Gulf of Mexico's oil and gas production barely took a dent.

BHUBNESHWAR, India (AP) — Monsoon flooding has killed at least 16 people and left more than 220,000 marooned in villages in eastern India as incessant rains caused a river to breach its banks in several places, an official said. So far, 180,000 people have been evacuated to relief camps. The new flooding comes just a month after the monsoon-swollen Kosi river, a Ganges tributary that flows from Nepal to India, burst its banks and submerged nearly 1,000 villages in the impoverished northern Indian state of Bihar, killing at least 48 people and driving more than a million others from their homes.

Survey: 4 in 10 say Clergy should Endorse Candidates

Four in 10 Americans believe that religious leaders should be permitted to endorse political candidates from the pulpit without risking their organization's tax-exempt status, a new survey by the First Amendment Center shows. Twenty-two percent of respondents "strongly" agreed and 18% "mildly" agreed that religious leaders should be able to make such endorsements, which are currently prohibited by IRS regulations. In comparison, 39% strongly disagreed, 15% mildly disagreed and 6% didn't know or refused to answer. When asked to name specific rights guaranteed by the First Amendment, just 15% mentioned religion, the lowest percentage to recall that topic since 2000. Asked if Americans have too much or too little religious freedom, 6% said they had too much, 28% said they had too little and 62% said they had about the right amount. Asked about freedom of worship, 54% said the concept applies to all religious groups regardless of how extreme their beliefs may be. In comparison, 29% said it was never meant to apply to religious groups that the majority of people consider to be extreme. Asked about freedom of worship, 54% said the concept applies to all religious groups regardless of how extreme their beliefs may be. In comparison, 29% said it was never meant to apply to religious groups that the majority of people consider to be extreme.

  • JJ Commentary: Our beloved country has moved so far from its constitutional and Christian foundations, that today’s electorate is totally muddled in their opinions. With no clear majorities regarding religious freedoms, we will continue to see vocal and well-financed minorities impose their extreme beliefs on us all.

Muslim Prayer Dispute

Mohamed Rage, who leads the Omaha Somali-American Community Organization, said 80 workers were thrown out after an altercation late Thursday. He says when they tried to return for their shift Friday, they were fired, along with 70 others. Police said were called to the plant late Thursday amid reports of a riot or serious fight. But when officers arrived, the situation had calmed. Muslim workers have been asking for accommodations with break times to allow prayer at sunset. The issue led to walkouts this week — not only from Muslims but from non-Muslims who protested such accommodations as preferential treatment. JBS Swift & Co. officials have not returned repeated calls seeking comment.

Israeli Politics

JERUSALEM (AP) — Prime Minister Ehud Olmert, crippled by a series of corruption investigations, announced he would resign Sunday, clearing the way for his foreign minister to try to succeed him as Israel's next leader. The prime minister's office said Olmert would submit an official letter of resignation to President Shimon Peres later Sunday, freeing the president to formally tap Tzipora Malka "Tzipi" Livni to try to put together a new government. Weeks ago, Olmert promised to step down after his governing Kadima Party elected a new chief to replace him. Livni, a rival of Olmert's, won that race last week by a narrow margin, but that victory did not assure her the premiership. As prime minister, Livni would be expected to pursue a moderate and pragmatic course in peacemaking with the Palestinians and Syria. She will become Israel's first female prime minister since Golda Meir stepped down in 1974.


LAGOS, Nigeria (AP) — Nigeria's main militant group says it has destroyed another pipeline in the country's restive southern oil region. The Movement for the Emancipation of the Niger Delta said in a statement Saturday that its fighters destroyed the pipeline run by the local unit of Royal Dutch Shell PLC late Friday. The group said it would continue attacking Nigeria's oil infrastructure until the Africa's oil giant had no crude production left. Shell officials weren't immediately available for comment.

Pakistan Terrorism

ISLAMABAD, Pakistan (AP) — Rescuers pulled more bodies from the shell of the truck-bombed Marriott Hotel in Pakistan's capital Sunday, pushing the death toll from one of the country's worst-ever terrorist strikes to 53, including the Czech ambassador and a second American. The hotel, a favorite spot for foreigners and the Pakistani elite — and a previous target of militants — still smoldered from a fire that raged for hours after the previous day's explosion, which also wounded more than 250 people. The targeting of the American hotel chain came at a time of growing anger in the Muslim nation over a wave of cross-border strikes on militant bases in Pakistan by U.S. forces in Afghanistan. Analysts said the attack served as a warning from Islamic militants to Pakistan's new civilian leadership to stop cooperating with the U.S.-led war on terror.


MOGADISHU, Somalia (AP) — Mortars slammed into a market in Somalia's capital Monday, killing up to 30 people including children and overwhelming hospitals with dozens of wounded in the worst fighting in months, witnesses said. The violence — shocking even for this chaotic country in the Horn of Africa — comes as Islamic insurgents who want to topple the government appear to be gaining significant power. The government, which has failed to assert any real control since it was formed in 2004, had no immediate comment on the bloodshed. The fighting began after Islamic insurgents fired mortars at the capital's main airport and the presidential palace. Islamic militants with ties to al-Qaeda have been fighting the government and its Ethiopian allies for control since their combined forces pushed the Islamists from the capital in December 2006. But the government has failed to deliver any basic services, is riddled with corruption and comes under daily attack.

Friday, September 19, 2008

Economy (The Third Horseman)

WASHINGTON — Treasury Secretary Henry Paulson said Friday he will work through the weekend with financial officials and members of Congress to find a way to "remove troubled assets from our financial system." At a news conference, Paulson said troubled home loans "are now parked or frozen" on the books of financial institutions, preventing them from making new loans. He said the root cause of the financial crisis is "illiquid mortgage assets" that have lost their value and are clogging the financial system. About 5 million home loans are delinquent, Paulson said, with "irresponsible lending" and "irresponsible borrowing" at the root of the problem. The Treasury said it will tap the $50 billion Exchange Stabilization Fund to provide guarantees for money market mutual funds. The exchange fund was created in 1934, during the Depression, to provide support for the dollar. The Fed said it will expand its emergency lending efforts to allow commercial banks to finance purchases of asset-backed securities from money market funds. The central bank's move should help the funds meet demands for redemptions.

  • JJ Commentary: The previous and proposed government bailouts only further our long march from a free-market economy to socialism, a key objective of the New World (Dis)Order folks. They help to manufacture crises and then institute more socialism in response – “controlled chaos” they call it.

USA TODAY — We've entered a period of tight credit — which could mean jobs lost, retirement plans pruned, college deferred and lifestyles diminished. Across the nation, Americans know that something's wrong. Nearly one-quarter of adults — 23% — believe the U.S. economy is in a depression, according to a USA TODAY/Gallup Poll taken Monday and Tuesday. That's nearly double the 12% who said so in February. At coffee shops and gas stations across the USA, people are wondering what the government has gotten them into as taxpayers with all the federal bailouts. "We just keep going deeper and deeper in debt," says Milton Hubbard, 58, a pastor in Chanute, Kan. "At some point, it is going to crash." Nearly 50% of the USA's 27 million small businesses say they've been "impacted by the credit crunch," according to a July survey by the National Small Business Association trade group. Predictably, many are postponing big purchases, not filling vacant jobs and cutting back on business travel and advertising. Spooked by the Wall Street meltdown, they're moving personal and business-related cash to safer, federally insured savings accounts and CDs.

VIENNA — After a brief respite, concerns over deepening turmoil in the U.S. financial system sent oil prices back above $100 a barrel Thursday. In addition, stepped-up attacks by Nigerian militants against the country's oil infrastructure helped to increase oil prices. In a fifth day of violence, Nigeria's main militant group said Wednesday that it had destroyed an oil-pumping station and a pipeline crossing southern Nigeria in a rare daylight attack. Parts of the USA are still running short of gasoline five days after Hurricane Ike knocked out 20% of the nation's refining capacity. The crunch is especially severe in the Southeast and Mid-Atlantic, which get their gas through pipelines from the Gulf region. It's largely hitting stations and convenience stores not affiliated with big brands such as ExxonMobil.

MOSCOWRussia ordered its main stock exchanges closed for a second day Thursday as President Dmitry Medvedev said 500 billion rubles ($20 billion) will be poured 0into financial markets in an effort to stabilize them. The government is struggling to stem a dizzying plummet in share prices and restore confidence in the economy — trouble that has revived memories of the 1998 financial collapse. The financial regulator first suspended trading on Wednesday after the RTS, a leading index, fell 6.5%.

LONDON (AP) — Lloyds TSB on Thursday announced a $21.9 billion deal to take over struggling HBOS, Britain's biggest mortgage lender. The government said it would facilitate the deal by overriding anti-monopoly regulations. The takeover follows days of heavy selling pressure on HBOS shares, which closed Wednesday down 20% at $2.68, a fifth of their value at the start of the year. The combined companies will account for more than a quarter of the U.K. mortgage market and 400 billion pounds, or $715 billion, in savings deposits.

The Financial Times says central bankers are taking a coordinated approach to the recent upheaval in financial markets. "The package of up to $247 billion comes from the U.S. Federal Reserve, the European Central Bank, the Swiss National Bank, the Bank of England, the Bank of Canada and the Bank of Japan," CNN says. "The injection of cash, which amounts to an expansion of up to $180 billion in available funds, is an effort to fuel economic activity." The New York Times says the actions come at a "potentially dangerous new phase" in the crisis. "Some economists worry that a psychology of fear has gripped investors, not only in the United States but also in Europe and Asia," the paper says.

Weather Signs

HOUSTON — Rescue crews pulled out of Galveston and the death toll climbed to 51 Wednesday as a broad swath of the country from the Gulf Coast to the upper Midwest reeled from the aftereffects of Hurricane Ike. Thousands remained on the island of Galveston despite authorities' urging them to leave, and thousands more choked an interstate leading in. The backlog of traffic frustrated transportation officials, who pointed out that among those idling in the choked interstate were emergency crews and trucks hauling resources badly needed on the island. In Houston, residents again waited in line for hours Wednesday at two dozen supply distribution centers for food, water and ice. Mayor Bill White complained FEMA wasn't bringing in the supplies fast enough. FEMA officials in Houston said they were refining glitches in the relief effort and delivering millions of meals and water every 24 hours.

HOUSTON — The Texas public health commission has warned of a public health crisis if post-hurricane conditions persist. The University of Texas Medical Branch, a major hospital with a trauma center in Galveston, is closed because of water and wind damage. Health officials already are seeing a flood of hurricane-related injuries and illnesses. Starting Wednesday, paramedics were told to bring the least critical patients a few blocks away to an engineering building at Rice University, where the federal government's Disaster Medical Assistance Teams (DMAT) set up a mobile medical unit. Another disaster medical team that has worked in the Galveston hospital's emergency room since Sunday treated 650 patients by Thursday night. About 60% were flown out by helicopter. "People who stayed during the storm are coming on foot, by bicycle," says Michael Purcaro of the Connecticut-based medical team that, along with an Iowa team, is staffing the Galveston DMAT. The bacteria in the flood zone has had time to incubate, says UTMB president David Callender. "There is no running water, no sewage process, no natural gas to cook food, food is spoiled, there's all this debris," he says. "We're moving into a high-risk phase."

GALVESTON, Texas (AP) — Hundreds of people whose beachfront homes were wrecked by Hurricane Ike may be barred from rebuilding under a little-noticed Texas law. And even those whose houses were spared could end up seeing them condemned by the state. Now here's the saltwater in the wound: It could be a year before the state tells these homeowners what they may or may not do. Worse, if these homeowners do lose their beachfront property, they may get nothing in compensation from the state. The reason: A 1959 law known as the Texas Open Beaches Act. Under the law, the strip of beach between the average high-tide line and the average low-tide line is considered public property, and it is illegal to build anything there.

BREEDSVILLE, Mich. (AP) — Part of a dam in Van Buren County has given way to rising waters as rivers remain above flood stage across much of southern Michigan. Heavy rains that included remnants of Hurricane Ike have caused flooding in wide areas of the state.

OneNewsNow reports that many Haitians have been fending for themselves since Ike struck more than a week ago, struggling without airborne assistantce. Many low-lying areas were already flooded from previous tropical storms, and Ike exacerbated conditions to life-threatening levels. Mission Aviation Fellowship reports that some landing trips are under water. Will White, a pilot with MAF, said, "What little infrastructure in the roads that were here [such as] bridges are now washed out....they were bad roads to start with and now they're just destroyed," he shares. "The government is very limited in what they can do. Right now the relief effort is from the international community."

923 Million People Went Hungry Last Year, U.N. says

The ranks of the world's hungry totaled some 923 million people in 2007, the United Nations estimates in a new report. The Food and Agriculture Organization blames much of the increase on rising prices that pushed an additional 75 million people below the "hunger threshold." "At regional level, the largest increases in the number of undernourished people as a result of rising food prices have taken place in Asia and in sub-Sahara Africa, the two regions, which combined, already accounted for 750 million, or 89% of the hungry people in the world.

Spain to Pay Jobless Immigrants to Go Home

MADRID, Spain (AP) — Spain will pay jobless immigrants to go back home under a decree approved Friday, more dramatic evidence of how a once-booming economy has gone bust. Labor Minister Celestino Corbacho says the measure was approved at a Cabinet meeting under a fast-track procedure and will take effect in about a month. The plan approved Friday applies to non-EU citizens who have been laid off in Spain and are entitled to joblessness benefits. It offers them a lump sum payment of 40% of that money once they renounce their work and residency permits, and the remaining 60% once they get home.

North Korean Duplicity

PANMUNJOM, Korea (AP) — North Korea said Friday it is making "thorough preparations" to restart its nuclear reactor, accusing the United States of failing to fulfill its obligations under an international disarmament-for-aid agreement. It is the first time the communist nation has confirmed a reversal of steps taken since last year to disable its nuclear program because of Washington's refusal to quickly remove it from a U.S. terrorism blacklist. Under the landmark 2007 pact — involving the two Koreas, the U.S., China, Russia and JapanNorth Korea pledged to disable its nuclear program as a step toward its eventual dismantlement in exchange for diplomatic concessions and energy aid equivalent to 1 million tons of oil. North Korea began disabling the Yongbyon complex last year, and the process was 90% complete, with eight of 11 key steps carried out "perfectly and flawlessly," Hyun said. But the accord ran aground in mid-August when Washington refused to take North Korea off its list of states that sponsor terrorism, saying the North first must accept a plan to verify its nuclear declaration.

  • JJ Commentary: Did anyone really believe that North Korea would go through with its promised nuclear deactivation? They got as much as they could out of the brief détente, and now are just looking for excuses to do what they always intended to do.


SAN'A, Yemen (AP) — At least 25 militants with suspected links to al-Qaeda have been arrested in connection with the deadly attack on the U.S. Embassy in the Yemeni capital, a senior security official said Thursday. It is not unusual for authorities in Yemen, a key partner in the U.S.-led war on terror but for years an al-Qaeda stronghold, to round up a large number of suspects in the wake of a terror attack. The official said a U.S. team was on its way to Yemen to take charge of the investigation. The attack Wednesday killed 16 people but failed to breach the compound's walls. None of those killed or wounded were U.S. diplomats or embassy employees. The sophisticated bombing plot carried out against the U.S. Embassy in Yemen brings increased urgency to fears that Muslim extremists are gathering strength in that nation and could make it a headquarters for terrorism.


SRINAGAR, India (AP) — Police fired tear gas and used batons to disperse rock-throwing demonstrators Friday as anti-India protests flared again in Kashmir, police said. Thousands of people took to the streets after Friday prayers in the Muslim-majority region, responding to a call from separatist leaders to step up protests against Indian rule during the Muslim holy month of Ramadan. Also Friday, the Indian government said it was ready to allow direct trade between Indian-controlled Kashmir and the Pakistani portion, a major demand of recent protests. In recent months the Indian-controlled portion of Kashmir has seen some of the largest protests against Indian rule in two decades. While they subsided in recent weeks, separatist leaders have launched a string of protests during Ramadan. A general strike has been called for Saturday.

Authorities: Engineer Texting at Time of Calif. Train Wreck

LOS ANGELES (AP) — U.S. authorities investigating why a commuter train engineer ran through a red signal and into an oncoming freight train have confirmed that he was text messaging while working on the day of the fatal collision. The California Public Utilities Commission, meanwhile, was scheduled to vote Thursday on a proposed emergency order banning the use of cellphones while operating a train. Commission President Michael R. Peevey, who is seeking the order, said some railroads have such policies but they're widely ignored. The National Transportation Safety Board requested the cellphone records of Metrolink engineer Robert Sanchez after two teenage train fans said they had exchanged text messages with him shortly before the train collided head-on Friday with a Union Pacific freight train in suburban Chatsworth. The wreck killed 25 people, including Sanchez, and injured more than 130.

  • JJ Commentary: The “god of this age” knows how to corrupt technology to suit his devilish desires. But, “resist the devil and he will flee.”

Wednesday, September 17, 2008

Ike’s Havoc Expands

GALVESTON, Texas — Emergency crews on Monday reached some of the beach towns most devastated by Hurricane Ike, which left a giant disaster zone spread from the Gulf Coast to the upper Midwest. Three days after Ike crashed ashore, 47people were reported dead, the majority outside Texas. Ike's remnants caused flooding as far north as Chicago. Across the Midwest, the violent weather closed hundreds of schools and blocked roads. In Texas, the largest search-and-rescue operation in state history was likely to continue for several days. Rescuers found 60 survivors on the Bolivar Peninsula, which stretches across the Texas Gulf Coast. Some communities were nearly washed away, including Smith Point and Oak Island just north of the peninsula. Oak Island, which has about 500 residents, lost about 95% of its homes.

Among the biggest problems in Ike's aftermath: an estimated 3.9 million people were still without power Tuesday in Texas, Ohio, Kentucky, Indiana, Louisiana and Arkansas, the Energy Department reported; nearly 40,000 people were in shelters; about 99% of crude oil production operations in the Gulf region were offline. Galveston Mayor Lyda Ann Thomas said the situation is nearing a health crisis. The city can produce only a tiny amount of clean drinking water, there is minimal electricity and the University of Texas Medical Branch is unable to care for seriously injured people. To the roughly 20,000 people who remained, Thomas said simply, "Please leave. The city is in ruins." Along the 30-mile Bolivar Peninsula that stretches across the southern part of Galveston Bay, towns were accessible only by boat. About two-thirds of Houston's 2.2 million residents lacked power Tuesday.

ST. LOUIS — Just a few months after near-record flooding across the Midwest, roads in the region were under water again Tuesday and more than 1 million people were without power thanks to the remnants of Hurricane Ike. Several rivers in Missouri were rising toward crests expected later this week, some more than 15 feet above flood stage. Flooding already was occurring at several towns along the Missouri and Mississippi rivers, including St. Louis. Ike dumped as much as 8 inches of rain on parts of Indiana, Illinois and Missouri after coming ashore in Texas during the weekend. It spawned hurricane-force wind in Ohio and a tornado in Arkansas that damaged several buildings.

Economic Woes Expand

Lehman Bros. Merrill Lynch. Fannie Mae. Freddie Mac. Countrywide Financial. Bear Stearns. In staggering succession, some of Wall Street's oldest and biggest firms have been seized, failed outright or merged into other companies. The credit crunch, which began in the real estate market, has emerged as a full-blown financial crisis threatening the global credit markets. Thanks partly to nimble emergency moves by the U.S. government, the financial system has avoided a full-scale collapse. There is widespread concern, however, that other financial institutions could be brought down by the sliding home mortgage market. Two Wall Street icons are about to vanish as independent companies. Lehman Bros., which began 158 years ago as Alabama cotton traders, filed for bankruptcy protection. And Merrill Lynch, whose bull mascot has been Wall Street's iconic symbol of optimism since 1970, agreed to be absorbed by Bank of America. Analysts say too many companies have borrowed too much to buy high-risk assets — mainly securities backed by subprime mortgages, which are loans made to borrowers with poor credit. Now, companies that own those securities must write off their losses and raise fresh cash.

The Federal Reserve said Tuesday night it would lend up to $85 billion to flailing insurance giant American International Group, saying the move was necessary to protect the financial system. The action averts a bankruptcy filing by AIG, which has been struggling to raise capital after crippling losses on protection it sold to investors in mortgage-backed securities. It also faced additional pressures to meet collateral calls from investors after its credit rating was downgraded by four rating agencies Monday night. The senior management of AIG will be tossed out, and the government will effectively be in control of the company. The government will have a 79.9% equity interest in AIG and the right to veto the payment of dividends to common and preferred shareholders. The Fed's decision, made with the Treasury Department's support, came just days after the Treasury and Fed refused to bail out investment bank Lehman Bros. The main difference between the two situations: AIG is so huge and its operations so intertwined in the financial system that the Fed feared an AIG failure could harm the broader economy.

WASHINGTON — Urgently trying to keep cash flowing to prevent a Wall Street meltdown, the Federal Reserve on Tuesday pumped $50 billion into the nation's financial system to help ease credit stresses. Tuesday’s cash injection was in the form of short-term repurchase agreements in which the Fed makes the loans, accepting agency and mortgage-backed securities as collateral. A repurchase agreement or repo, is a contract in which the seller of securities, in this case financial companies, agree to buy them back at a specified time at a specified price.

WASHINGTON — The Federal Reserve on Tuesday voted unanimously to keep a key interest rate at 2% while acknowledging that turmoil in financial markets has "increased significantly" and the economy appears to be weakening. In a statement released at the end of a one-day meeting, the Fed's policymaking Open Market Committee said it has "significant" concerns about both inflation and the slowing rate of economic growth. "Strains in financial markets have increased significantly and labor markets have weakened further," the Fed said.

WASHINGTON (Reuters) — Construction of new homes plummeted to a 17-1/2-year low in August as builders scaled back sharply to try to cope with the deep housing slump. The Commerce Department said Wednesday that starts on new homes fell 6.2% from July, to a seasonally adjusted annual rate of 895,000, lowest since 1991 and well below the 950,000 rate that economists surveyed by Reuters had anticipated. With home foreclosures soaring and prices falling, builders are clearly bracing for a protracted downturn. New applications for building permits declined 8.9% in August to an annual rate of 854,000.

MOSCOW — Russian stock exchanges halted stock and bond trading Wednesday after one of the worst falls since the country's 1998 financial collapse, and the Finance Ministry pledged $60 billion to help local banks. Investors have dumped Russian assets after global financial turmoil combined with falling oil prices and Moscow's war with Georgia to form a toxic cocktail for the Russian markets.

VIENNA — A “silver lining” to the current economic woes is that oil prices fell again Tuesday, slipping below $92 a barrel, reflecting market fears that the credit crisis will be a drag on global economic growth and restrain demand for crude. OPEC's production cut of 520,000 barrels a day earlier this month has failed to stem the decline. The 13-nation group said oil demand in the U.S. fell by 800,000 barrels a day last month due to the slow economy and high retail prices.