Month: October 2008

Russia to stage largest air force war games since Soviet times

by

Russia will stage its largest air force war games since Soviet times next week in the latest stage of the Kremlin’s strategy to show off the country as a military superpower reborn.

Their progress watched closely by increasingly jittery western militaries, dozens of nuclear bombers will take part in the exercise. Tu-95 Bear bombers will fire cruise missiles at targets in sub-Arctic Russia for the first time since 1984.

While Russia insists that the war games are not meant as a gesture of aggression, the West is growing increasingly uneasy about the scale of the manoeuvres.

The aerial exercises, which will take place close to American airspace in Alaska, are part of a month-long war game known as Stability 2008 that Russia claims is the biggest for 20 years.

As the bombers take to the air next week, Russian ships will also be conducting exercises in the North Sea and the Baltic as well as in the Atlantic and Pacific Oceans. A flotilla of war ships is also sailing to the Caribbean for joint exercises with Venezuela, Washington’s greatest foe in South America, which will come within a few hundred miles of the US coastline.

Read moreRussia to stage largest air force war games since Soviet times

Financial Crisis: Hypo Real Estate on brink of collapse

by

Another top European bank is on the brink of collapse after a consortium of German financial institutions withdrew from a state-led rescue plan agreed two days ago.


Hypo Real Estate is the fifth German bank to be bailed out because of the credit crunch Photo: AP

Hypo Real Estate (HRE), the second largest mortgage lender in Germany, said the 35 billion euro (£27.3 billion) bail-out fell apart on Saturday.

The news is a fresh blow for the global financial system struggling to master an unprecedented crisis of confidence.

Hypo Real Estate was the fifth German bank to be bailed out in the wake of the credit market turmoil stemming from America.

Read moreFinancial Crisis: Hypo Real Estate on brink of collapse

Europe fights financial storm as bank deal collapses

by


Nicolas Sarkozy (C) flanked by Angela Merkel (L) and Gordon Brown

PARIS (AFP) – The leaders of Europe’s four main economic powers vowed to protect fragile banks in their fight against the global credit crisis as the biggest rescue in German financial history collapsed.

France, Germany, Britain and Italy put on a united front, promising a more coordinated approach to the credit crunch, although Germany’s Chancellor Angela Merkel insisted states would mainly act individually.

Read moreEurope fights financial storm as bank deal collapses

Financial Crisis: Fortis’ Dutch assets are nationalised

by

The Dutch operations of Fortis, Europe’s largest victim of the credit crisis, have been nationalised in a €16.8bn (£13bn) deal aimed to calm investors in the troubled banking and insurance group.


Fortis is Europe’s largest victim of the credit crisis Photo: AFP

The Netherlands government stepped in to take over the assets, including buying Fortis’ interest in ABN Amro – the Dutch investment bank it jointly acquired last year in a consortium with Royal Bank of Scotland and Banco Santander. Shares in Fortis have tumbled almost 70pc this year as fears mounted that it had overstretched itself through its €24bn participation in the ABN Amro transaction.

Yesterday’s deal replaces an agreement struck on Sunday by the Belgium, Dutch and Luxembourg governments to rescue Fortis by pumping €11.2bn into the Belgian-Dutch bank. Under that deal, they would have taken a 49pc stake in the bank’s operations within each of their borders.

Read moreFinancial Crisis: Fortis’ Dutch assets are nationalised

World economic crisis: France moves into recession

by

The French premier, Francois Fillon, today warned that the world was “on the edge of the abyss” as his country moved into an official recession.

Fillon’s comments, blaming an “irresponsible” financial system, came as the Dutch government seized control of bancassurer Fortis’s Netherlands operations in a €16.8bn (£13.06bn) deal greed with the Belgian and Luxembourg authorities.

The effective nationalisation, forced upon the governments by the scale of the financial meltdown, includes Fortis’s interests in Dutch bank ABN Amro.

The shock decision came just days after the three governments injected €11.2bn into Fortis, Belgium’s biggest bank, to keep it afloat.

Read moreWorld economic crisis: France moves into recession

Citigroup Girds for Wachovia Takeover Battle With Wells Fargo

by

Oct. 4 (Bloomberg) — Citigroup Inc., hobbled by $61 billion of subprime-related losses, now faces its biggest takeover battle in a fight with Wells Fargo & Co. for control of Wachovia Corp.

Citigroup fell as much as 21 percent yesterday in New York trading after Wells Fargo, the biggest U.S. bank on the West Coast, agreed to acquire all of Charlotte, North Carolina-based Wachovia for $15.1 billion. The bid trumped Citigroup’s government-backed offer of $2.16 billion for Wachovia’s banking operations.

“The taxpayer doesn’t pay a penny” for the Wells Fargo deal, Wells Chairman Richard Kovacevich, 64, said yesterday in an interview. His company’s bid is superior to Citigroup’s also because it’s a higher price and the combining banks “share similar cultures and values.”

Read moreCitigroup Girds for Wachovia Takeover Battle With Wells Fargo

At Least 21 Killed in US Strike in North Waziristan

by

A US missile strike destroyed a house in a North Waziristan village today, killing at least 21 people according to a senior Pakistani official. Of the 21, a local official said 16 of them foreigners. He also added that the house belonged to two Afghan refugees who settled in the area after the 2001 US invasion.

Another report claimed that a separate US air strike in a different village early in the morning killed three civilians and injured at least six others. This report was denied by Pakistani military spokesman Major General Athar Abbas, who told the AFP that this second strike was actually on the Afghan side of the border, not on Pakistani soil. He said the US informed the Pakistani government before the Afghan strike, but so far there has been no official military comment regarding the much larger North Waziristan strike.

This is the second US air strike on North Waziristan this week, with a previous attack killing at least nine and injuring several others. The US has been escalating its unilateral attacks on Pakistani soil over the past month, damaging relations between the Bush Administration and the fledgling government of President Asif Ali Zardari. Pakistani forces have been reported to open fire on US incursions several times in recent weeks, with the most recent conflict leading to a reported five minute firefight between US and Pakistani ground troops. Pakistani Prime Minister Yousef Raza Gilani has said the US strikes are a “form of terrorism” and must stop.

Read moreAt Least 21 Killed in US Strike in North Waziristan

Prof. Feldstein: The bailout bill doesn’t get at the root of the credit crunch

by

The Problem Is Still Falling House Prices

A successful plan to stabilize the U.S. economy and prevent a deep global recession must do more than buy back impaired debt from financial institutions. It must address the fundamental cause of the crisis: the downward spiral of house prices that devastates household wealth and destroys the capital of financial institutions that hold mortgages and mortgage-backed securities.

The recently enacted financial rescue plan does nothing to stop this spiral. Credit will not flow and liquidity will not return to the banking system until financial institutions have confidence in the solvency and liquidity of other banks.

Because of the 20% fall in the price of homes since the bursting of the house-price bubble, there are now some 10 million homes with mortgages that exceed the value of the house.

Read moreProf. Feldstein: The bailout bill doesn’t get at the root of the credit crunch

What You Could Get for $700 Billion

by

The US Congress is going to take another stab at passing the gigantic bank bailout package on Friday. But how much money are we talking about? SPIEGEL ONLINE gives you an idea.


$700 Billion. What else could be done with all those zeros? We have some ideas. (AFP)

Money makes the world go round — and certainly with $700 billion — that’s $700,000,000,000 — you could accomplish a great deal. That’s how much the US government wants to pump into the financial system in order to avoid another bankruptcy on the scale of Lehman Brothers.

The deal stumbled in the House of Representatives on Monday, leading immediately to a steep stock exchange fall in New York and markets around the world. Now, though, after a bit of tinkering, Congress has been asked to vote again. The Senate has already given “Bailout Package: The Sequel” its seal of approval with the House set to vote again on Friday.

But just how much money are we talking about here? Most folks’ eyes get glassy once the number of zeros gets up above six. As a public service, SPIEGEL ONLINE has come up with a list of other things one could possibly do with $700 billion, were it lying around.

10/03/2008

Source: Spiegel Online

Russia Says Deadly Ossetia Blast Aimed to Undermine Cease-Fire

by

Oct. 4 (Bloomberg) — The Russian Defense Ministry said an explosion in separatist South Ossetia that killed seven Russian military personnel, including a senior officer, was intended to break a cease-fire with Georgia.

The ministry “regards this event as a carefully planned terrorist attack aimed at breaking off the fulfillment of all sides’ obligations under the Medvedev-Sarkozy plan,” according to a statement posted on its Web site late yesterday. South Ossetian leader Eduard Kokoity blamed Georgia for the blast.

French President Nicolas Sarkozy, whose country holds the rotating European Union presidency, brokered the cease-fire that ended a five-day war between Russia and Georgia over South Ossetia in August. On Sept. 8, Sarkozy and Russian President Dmitry Medvedev agreed on a timetable for the withdrawal of Russian troops from buffer zones that extend into Georgia from South Ossetia and another breakaway region, Abkhazia.

Read moreRussia Says Deadly Ossetia Blast Aimed to Undermine Cease-Fire

U.S. loses 159,000 jobs in September, worst one-month drop in five years

by

WASHINGTON — As the presidential election season nears its climax, there is growing evidence that the country is slipping into the deepest recession in decades.

The latest marker came Friday, when the government reported that employers shed 159,000 jobs in September, far more than expected. That was the worst one-month drop in more than five years and brings to 760,000 the number of jobs that have disappeared this year.

Economists say the accelerating pace of job losses, combined with the most severe credit crisis since the Great Depression, make it increasingly likely that the government bureau that determines business cycles will eventually stamp “recession” on this one.

“This should remove any lingering doubts that the economy is in a recession,” said Dean Baker, co-director of the Center for Economic and Policy Research. “The rate of job loss is accelerating and the unemployment rate is virtually certain to cross 7% early in 2009.”

Read moreU.S. loses 159,000 jobs in September, worst one-month drop in five years

Bush Signs Bailout After House Passage

by

WASHINGTON — President George W. Bush signed the biggest government intervention in the financial markets since the Great Depression after U.S. House of Representatives lawmakers wary of growing signs of the nation’s economic distress voted Friday in favor of a $700 billion Wall Street rescue package.


President Bush is greeted by Treasury Secretary Henry Paulson after the House passed the bailout bill (AP)

Mr. Bush welcomed the passage of a rescue plan, saying it will help the nation’s economy withstand the financial turmoil. The legislation is “essential to helping America’s economy weather the financial crisis,” said the president, giving a brief statement outside the White House.

Mr. Bush acknowledged widespread concern about using taxpayer money to bail out wealthy bankers, but said the ultimate cost will be “far less” than the initial government outlay, since the plan is to sell the toxic assets back into the market once it recovers.

Read moreBush Signs Bailout After House Passage

Life in Zimbabwe: Wait for useless money

by


At a bank in Harare, Zimbabwe, this week, the police directed customers trying to withdraw their nearly worthless savings. (Associated Press)

HARARE, Zimbabwe: Long before the rooster in their dirt yard crowed, Rose Moyo and her husband rolled out of bed. “It is time to get up,” intoned the robotic voice of her cellphone. Its glowing face displayed the time: 2:20 a.m.

They crept past their children sleeping on the floor of the one-room house – Cinderella, 9, and Chrissie, 10 – and took their daily moonlit stroll to the bank. The guard on the graveyard shift gave them a number. They were the 29th to arrive, all hoping for a chance to withdraw the maximum amount of Zimbabwean currency the government allowed last month – the equivalent of just a dollar or two.

Zimbabwe is in the grip of one of the great hyperinflations in world history. The people of this once proud capital have been plunged into a Darwinian struggle to get by. Many have been reduced to peddlers and paupers, hawkers and black-market hustlers, eating just a meal or two a day, their hollowed cheeks a testament to their hunger.

Read moreLife in Zimbabwe: Wait for useless money

Half of Zimbabwe dependent on aid, says UN humanitarian chief

by

UN calls for increased farming production to prevent an extra 2 million people becoming reliant on food and medical aid

Almost half the population of Zimbabwe could soon be dependent on food and medical aid, the UN’s humanitarian chief said today.

John Holmes, the UN’s under-secretary general for humanitarian affairs, said that around 3 million people were already reliant on aid, and that figure could rise to more than 5 million.

He said it was a critical time because preparations needed to be made now for next year’s harvest to avoid millions more people becoming reliant on aid. The main growing season in Zimbabwe lasts from now until March.

Read moreHalf of Zimbabwe dependent on aid, says UN humanitarian chief

Surveillance of Skype messages found in China

by


Nart Villeneuve, a senior research fellow at Citizen Lab in Toronto, and Ronald Deibert, a political scientist at the University of Toronto, found the surveillance system. (Jim Ross for The New York Times)

SAN FRANCISCO: A group of Canadian human-rights activists and computer security researchers has discovered a huge surveillance system in China that monitors and archives certain Internet text conversations that include politically charged words.

The system tracks text messages sent by customers of Tom-Skype, a joint venture between a Chinese wireless operator and eBay, the Web auctioneer that owns Skype, an online phone and text messaging service.

The discovery draws more attention to the Chinese government’s Internet monitoring and filtering efforts, which created controversy this summer during the Beijing Olympics. Researchers in China have estimated that 30,000 or more “Internet police” monitor online traffic, Web sites and blogs for political and other offending content in what is called the Golden Shield Project or the Great Firewall of China.

The activists, who are based at Citizen Lab, a research group that focuses on politics and the Internet at the University of Toronto, discovered the surveillance operation last month. They said a cluster of eight message-logging computers in China contained more than a million censored messages. They examined the text messages and reconstructed a list of restricted words.

The list includes words related to the religious group Falun Gong, Taiwan independence and the Chinese Communist Party, according to the researchers. It includes not only words like democracy, but also earthquake and milk powder. (Chinese officials are facing criticism over the handling of earthquake relief and chemicals tainting milk powder.)

Read moreSurveillance of Skype messages found in China

US cross-border attacks a form of terrorism – PM

by

Islamabad: Prime Minister Yousuf Raza Gilani yesterday said that attacks by US drones on targets inside Pakistan’s tribal region bordering Afghanistan amounted to “terrorism”.

Talking to reporters at his official residence on the first day of Eid, Gilani rebuffed suggestions that the government had not condemned the incursions as forcefully as it should have.

“These attacks are a form of terrorism,” the prime minister said, adding that such actions encourage and strengthen militancy and were thus counter-productive.

Gilani said the US leadership had assured respect for Pakistan’s sovereignty and he hoped that the promise would be kept.

Read moreUS cross-border attacks a form of terrorism – PM

Wachovia faced a silent bank run

by

Fearing a loss of funding over the weekend, the FDIC forced the sale.


10/02/08 Downtown Charlotte skyline showing the Wachovia First Street Campus headquarters project under construction. DAVIE HINSHAW of the Observer from WCNC’s AirStar36

On Friday, with its stock plunging 27 percent, Wachovia experienced a “silent run” on deposits, but the bigger worry for regulators was that other banks wouldn’t provide the Charlotte bank with necessary short-term funding when it opened for business Monday, sources familiar with the situation told the Observer.

With Wachovia already looking for a merger partner, the Federal Deposit Insurance Corp., in consultation with other regulators, required the bank to reach a sale to Citigroup on Monday morning.

The FDIC, for the first time, used legislative authority created in 1991 to help it deal with a “very large complex bank failure” on short notice. It requires approval from heavy hitters – two-thirds of FDIC board members, two-thirds of Federal Reserve board members as well as the Treasury secretary, who must consult with the president.

“When Wachovia opened Monday it would not have had a source of liquidity,” a source familiar with the situation said. “It really could not have opened under those circumstances. That’s why (the FDIC) put together the assistance package.”

Read moreWachovia faced a silent bank run

The Elephant in the Room: Credit Default Swaps

by

Studies show that people often fear the wrong things. We are terrified of things which probably won’t hurt us, but blissfully unconcerned with things that might really kill us (see this, this and this). So we put a tremendous amount of energy into solving non-problems, and get blindsided by things that we don’t know about or which we are too afraid to even think about.

The same applies to the economic crisis.

For example, the market for credit default swaps is larger than the entire world economy.

Credit default swaps – which were largely responsible for bringing down Bear Stearns, AIG, WaMu and other mammoth corporations – are now being taken out against the U.S. government.

So you’d think that politicians trying to prop up the teetering U.S. economy would want to cancel credit default swaps, or at least declare their value is somewhere near zero.

Nope . . . not even on their discussion list, even though it is the real economic crisis.

Instead, they are proposing things which most experts say will actually harm the economy.

Call congress and tell them to stop their political posturing, stop ignoring the derivatives elephant in the room, and either do something useful or nothing at all.

Posted by George Washington at 1:08 PM
Wednesday, October 1, 2008

Source: George Washington’s Blog

Why Paulson has not explained the real purpose of the bailout to the American people

by

Related:
“An open, competitive, and liberalized financial market can effectively allocate scarce resources in a manner that promotes stability and prosperity far better than governmental intervention,” Paulson said 18 months ago.

Treasury Secretary Henry Paulson declared that the current turmoil in markets and financial institutions ultimately will “make things better.” (September 15, 2008)

The mystery has been solved

For nearly a year, we have been asking ourselves why the investors and foreign banks that bought up hundreds of billions of dollars of worthless mortgage-backed securities (MBS) from US investment banks have not taken legal action against these same banks or initiated a boycott of US financial products to prevent more people from getting ripped off?

Now we know the answer. It’s because, behind the scenes, Henry Paulson and Co. were working out a deal to dump the whole trillion dollar mess on the US taxpayer. That’s what this whole $700 billion boondoggle is all about; wiping out the massive debts that were generated in the biggest incident of fraud in history.

Rep Brad Sherman explained it like this last night to Larry Kudlow:

“It (The bill) provides hundreds of billions of dollars of bailouts to foreign investors. It provides no real control of Paulson’s power. There is a critique board but not really a board that can step in and change what he does. It’s a $700 billion program run by a part-time temporary employee and there is no limit on million dollar a month salaries……. It’s very clear. The Bank of Shanghai can transfer all of its toxic assets to the Bank of Shanghai of Los Angeles which can then sell them the next day to the Treasury. I had a provision to say if it wasn’t owned by an American entity even a subsidiary, but at least an entity in the US, the Treasury can’t buy it. It was rejected.

The bill is very clear. Assets now held in China and London can be sold to US entities on Monday and then sold to the Treasury on Tuesday. Paulson has made it clear he will recommend a veto of any bill that contained a clear provision that said if Americans did not own the asset on September 20th that it can’t be sold to the Treasury. Hundreds of billions of dollars are going to bail out foreign investors. They know it, they demanded it and the bill has been carefully written to make sure it can happen.”

So, why hasn’t the Treasury Secretary explained the real purpose of the bailout to the American people? Could it be that he knows that his $700 billion bailout would end up like the Hindenburg, vanishing in sheets of flames?

Read moreWhy Paulson has not explained the real purpose of the bailout to the American people

ECB Keeps Rate at 4.25% Even as Recession Looms

by

Oct. 2 (Bloomberg) — The European Central Bank kept interest rates at a seven-year high today to curb inflation, even after the credit crunch forced governments to bail out banks and increased the likelihood of a recession.

ECB policy makers meeting in Frankfurt left the benchmark lending rate at 4.25 percent, as predicted by all 58 economists in a Bloomberg News survey. The bank will cut borrowing costs in February next year, another survey shows.

The financial crisis reached new heights in Europe this week as governments stepped in to help rescue five banks and credit costs soared to records. With the euro-region economy on the brink of a recession and retreating oil prices pushing down inflation, the ECB may have more room to lower rates.

Read moreECB Keeps Rate at 4.25% Even as Recession Looms

Brazilian Government Largest Illegal Logger in the Amazon

by

BRASILIA, Brazil, September 30, 2008 (ENS) – A Brazilian government agency that provides land to settlers is the largest illegal logger in the Amazon rainforest and could face criminal prosecution, Environment Minister Carlos Minc said Monday. Minc blamed Institute of Colonization and Agrarian Reform, or Incra, for occupying the top six places on a new government list of the 100 largest illegal loggers.

Today, he backed off a little, giving another government agency 20 days to analyze information presented by Incra contesting the legality of the deforestation.

Illegally cut logs await transport from a clearing in the Brazilian rainforest. (Photo by Andy Revkin)

“As some questions had been raised about what is legitimate, Ibama will go to evaluate point the point,” Minc said, handing responsibility for the inquiry to the Brazilian Institute of Environment and Renewable Natural Resources, or Ibama.

Minc clarified that Incra is the formal owner of the six parcels of land at issue, which in fact were deforested by the settlers. But legally, he said, the problem falls again on Incra because the Institute cannot pass ownership of land to the agriculturists until it has been settled for 10 years.

“They are small deforestations, of 20 or 30 hectares, per person. On the other hand, a small one deforests little but thousands deforest a great deal,” said Minc. “Therefore, we have that to improve, and as well we have to improve the incidents of deforestation on conservation units and on aboriginal lands.”

In total, 223,000 hectares of the rainforest were logged on those six properties

The Amazon rainforest is being chopped down more than three times as fast as last year, Brazilian officials said Monday, after three years of declines in the deforestation rate.

Read moreBrazilian Government Largest Illegal Logger in the Amazon

EU to introduce ‘virtual strip searches’ at airports by 2010

by

Digital body scanners which leave little to the imagination will be used by airport security on passengers travelling across the European Union within two years.


The new imaging technology creates an image of an unclothed body which privacy critics argue ‘amounts to a virtual strip search’ Photo: PA

According to a draft European Commission regulation, seen by The Daily Telegraph, the new millimetre wave imaging scanners are to be used “individually or in combination, as a primary or secondary means and under defined conditions” to provide a “virtual strip search” of travellers.

The new EU regulation, which will be binding on Britain, is intended to enter into force across the continent by the end of April 2010.

Read moreEU to introduce ‘virtual strip searches’ at airports by 2010

Ford’s September sales drop 34 percent

by


Tight credit, economic worries and high gasoline prices auto purchases

DETROIT – Tight credit, economic worries and high gasoline prices combined to cut Ford Motor Co.’s U.S. sales once again in September, with the beleaguered automaker reporting a 34 percent decline from the same month last year.

It was Ford’s worst sales month this year, and the results are a strong indication that analysts’ forecasts of another dismal month will come true.

Hyundai Motor Co., whose single-digit sales decline this year has looked like a success against the Detroit automakers’ slide, reported its U.S. sales fell 25 percent. Other automakers are set to release their results later Wednesday.

Read moreFord’s September sales drop 34 percent

Wealthy investors hoard bullion

by

Investors in gold are demanding “unprecedented” amounts of bullion bars and coins and moving them into their own vaults as fears about the health of the global financial system deepen.

Industry executives and bankers at the London Bullion Market Association annual meeting said the extent of the move into physical gold was unseen and driven by the very rich.

“There is an enormous pick-up in investment demand. I have never seen a market like this in my 33-year career,” said Jeremy Charles, chairman of the LBMA. “The gold refineries cannot produce enough bars.”

Read moreWealthy investors hoard bullion