Nation’s largest insurer races to raise capital after being hit by credit raters.
NEW YORK (CNNMoney.com) — Shares of American International Group tumbled Tuesday as the company scrambled to raise as much as $75 billion to keep itself afloat.
The pressure on the nation’s largest insurer reached fevered pitch on Monday night as the troubled insurer was hit by a series of credit rating downgrades.
The cuts could prove deadly to AIG (AIG, Fortune 500), forcing it to post more than $13 billion in additional collateral.Shares were down 42% in early morning trading, after falling more than 70% in early morning trading and losing 61% of their value the day before.
Already battered, Washington Mutual shares fall as potential capital sources’ attention is diverted.
NEW YORK (CNNMoney.com) — Don’t forget about Washington Mutual.
Concerned that Wall Street has done just that, the nation’s largest savings-and-loan plummeted 22% in mid-day trading. Investors are concerned that potential sources of capital have disappeared in the upheaval this weekend on Wall Street that saw Lehman Brothers (LEH, Fortune 500) file the nation’s largest bankruptcy and Bank of America (BAC, Fortune 500) scoop up Merrill Lynch (MER, Fortune 500).
Washington Mutual (WM, Fortune 500) shares were battered last week, losing 36% of their value as investors grew increasingly nervous that the bank didn’t have enough capital to see it through the tsunami sweeping Wall Street.
NEW YORK (Reuters) – Shares of American International Group fell more than 50 percent in early trading on reports that the insurer had turned to the Federal Reserve for $40 billion in bridge financing to ward off a liquidity crisis and ratings downgrades.
AIG shares dropped 52 percent to $5.82 on the New York Stock Exchange before recouping a bit to $7.41. The shares have fallen 80 percent this year and closed Friday at $12.14.
Sept. 15 (Bloomberg) — Lehman Brothers Holdings Inc., the fourth-largest U.S. investment bank, succumbed to the subprime mortgage crisis it helped create in the biggest bankruptcy filing in history.
The 158-year-old firm, which survived railroad bankruptcies of the 1800s, the Great Depression in the 1930s and the collapse of Long-Term Capital Management a decade ago, filed a Chapter 11 petition with U.S. Bankruptcy Court in Manhattan today. The collapse of Lehman, which listed more than $613 billion of debt, dwarfs WorldCom Inc.’s insolvency in 2002 and Drexel Burnham Lambert’s failure in 1990.
Sept. 14 (Bloomberg) — Bank of America Corp. reached a deal to acquire Merrill Lynch & Co. for about $44 billion, the Wall Street Journal reported, after shares of the third-biggest U.S. securities firm fell by more than 35 percent last week and smaller rival Lehman Brothers Holdings Inc. neared bankruptcy.
Attention has focused on the danger presented by the failure of Lehman Brothers. But the failure of a commercial bank such as Washington Mutual can have systemic consequences if it threatens a run on other weak banks.
Washington Mutual – the sixth largest bank in the US – has lost more than a third of its market value recently as investors fear it lacks liquidity and capital to survive the credit crisis.
The failure of a bank its size would test the strength of the US deposit insurance system and its ability to maintain the confidence of the nation’s savers.
The true scale of the jobs disaster facing Britain is revealed today as experts issue dire warnings that up to half a million workers will lose their jobs over the next two years, as companies cut costs and scale back investment plans to survive the economic downturn.
Official figures are widely expected to reveal this week that the number of people out of work and claiming benefits increased for a seventh successive month in August.
Finance companies based in London’s Square Mile have already laid off thousands of workers since the US mortgage crisis unleashed chaos in the world’s markets last summer; and the 5,000 UK-based staff at crisis-hit investment bank Lehman Brothers are awaiting news this weekend about how many of them will be made redundant.
Global investment bank Lehman Brothers is teetering on the verge of collapse after Barclays pulled out of an 11th-hour rescue.
The departure of Barclays left US Treasury Secretary Hank Paulson and Tim Geithner, the head of the Federal Reserve Bank of New York, spearheading desperate last-ditch attempts to put in place some form of a workable rescue package.
Traders fear that the collapse of Lehman would send shockwaves around the world and spark a global sell-off of shares.
Lehman which employs 4,000 staff in London and 24,00 around the world, could be placed into liquidation as soon as Monday. The bank would be the single largest casualty of the current credit crisis and its collapse one of the biggest failures in Wall Street history.
In one of the most traumatic days in the history of Wall Street, Bank of America is reported to be on the verge of buying Merrill Lynch for $38bn.
China, which holds a fifth of its currency reserves in Fannie Mae and Freddie Mac debt, may cut the portion held in US dollars, according to China International Capital Corp (CICC), one of the nation’s biggest investment banks.
The US government this week seized control of the two mortgage-finance companies, which account for almost half of the home-loan market in the world’s biggest economy, to prevent defaults from crippling them. China holds up to $400 billion in the two firms’ debt, CICC Chief Economist Ha Jiming said in a report Thursday.
“The crisis has made Chinese officials realize it’s a bad idea to put all their eggs in one basket,” wrote Hong Kong-based Ha. “This will likely lead to greater diversification of foreign exchange reserve investments.”
China held $447.5 billion of US agency bonds as of June 2008, according to the CICC calculations using disclosures by the US Treasury. It is likely to reduce the portion of reserves in dollar assets from the current 60 percent by purchasing more non-dollar assets with new reserves, he said.
SAN FRANCISCO (MarketWatch) — As U.S. Treasury officials made it clear the government will not bail out Lehman Bros., the Federal Reserve Bank of New York met Friday night with Wall Street executives in an effort to forestall the collapse of the investment firm and shore up rapidly weakening financial markets.
The New York Fed called the emergency meeting Friday evening with the heads of major financial institutions and the group reportedly plans to continue meeting throughout the weekend if necessary to come up with a plan to save the ailing Lehman Bros. (LEH:Last: 3.76, -0.46, -10.90%) and prevent further damage among financial companies.
NEW YORK (Reuters) – Washington Mutual Inc (WM.N: Quote, Profile, Research, Stock Buzz) shares sank below $2 for the first time since 1990 as anxiety grew about the largest U.S. savings and loan’s mortgage losses, capital needs and survival prospects.
Its shares were down 17 cents, or 7.3 percent, at $2.15 on Thursday on the New York Stock Exchange, but fell to $1.75 earlier in the session. The stock has plunged 44 percent in the previous two days.
Wall Street is worried that Washington Mutual, like Lehman Brothers Holdings Inc (LEH.N: Quote, Profile, Research, Stock Buzz), may not have time to right itself, and that new the chief executive, Alan Fishman, will not find a buyer or raise enough capital for the Seattle-based thrift.
NEW YORK (Reuters) – Lehman Brothers Holdings Inc’s survival was called into question as its chief executive scrambled to sell assets to cover losses from toxic real estate investments, sending shares down as much as 46 percent.
The investment bank’s need to raise desperately needed cash, broadly outlined by CEO Dick Fuld on Wednesday, failed to assuage investor concerns. The stock dropped $2.92, or 40 percent, to $4.33 on Thursday after falling as low as $3.88.
The steady stream of grim tidings and the dearth of details from the company stoked fears that some of Lehman’s clients and trading partners might take their business to more stable firms.
Germany, the UK and Spain all face recessions this year, the European Commission forecast yesterday, dashing finally any remaining hopes that Europe would avoid a sharp economic downturn. France and Italy would fare little better, it said.
The steep downward revisions in growth forecasts by the European Union’s executive arm showed it had accepted that tumbling business and consumer confidence was hitting economic activity – even though the European economy had been “generally sound” prior to the credit crisis .
Joaquin Almunia, economics and monetary affairs commissioner, described the environment as “difficult and uncertain”. As well as financial turmoil and a near doubling of oil prices over the past year, significant housing market corrections in some countries were taking their toll, he said.
Sept. 9 (Bloomberg) — When the history is written on the collapse of Fannie Mae and Freddie Mac, it will go down in the annals of corporate scandals as one of the greatest accounting scams committed in broad daylight.
All anyone had to do to know the government-guaranteed mortgage financiers were insolvent was read their financial statements. You didn’t need a trained professional eye to discern this open secret, only a skeptical one.
Just last month, Fannie and Freddie said their regulatory capital was $47 billion and $37.1 billion, respectively, as of June 30. The Treasury Department now says it may have to inject as much as $200 billion of capital into the two companies. Nothing much changed at the companies in that span. They just couldn’t get the government to keep up the ruse any longer.
NEW YORK (Reuters) – Lehman Brothers Holdings Inc plans to sell a majority stake in its asset management unit and spin off commercial real estate holdings, hoping to restore investor confidence and ensure its survival after reporting a record quarterly loss of about $4 billion.
Shares failed to rebound on Wednesday morning after plunging 45 percent a day earlier, reflecting Wall Street disappointment that Lehman did not announce more concrete actions.
With yesterday’s announcement of the most massive federal bailout of all time, it’s now official: Fannie Mae and Freddie Mac, the two largest mortgage lenders on Earth, are bankrupt.
Some Washington bigwigs and bureaucrats will inevitably try to spin it. They’ll avoid the “b” word with vengeance. They’ll push the “c” word (conservatorship) with passion. And in the newspeak of 21st century bailouts, they’ll tell you “it all depends on what the definition of solvency is.”
The truth: Without their accounting smoke and mirrors, Fannie and Freddie have no capital. The government is seizing control of their operations. Their chief executives are getting fired. Common shareholders will be virtually wiped out. Preferred shareholders will get pennies. If that’s not wholesale bankruptcy, what is?
BEIJING, Sept 8 (Reuters) – The U.S. Treasury’s takeover of Fannie Mae and Freddie Mac is good news in the short term for China, the biggest holder of the giant mortgage lenders’ debt, but Beijing’s huge U.S. exposure still poses a serious risk, a prominent government researcher said on Monday.
China owned $376 billion of debt issued by U.S. government agencies, principally Fannie and Freddie, as of mid-2007.
The seizure of the two firms, prompted by worries over their shrinking capital, was the latest in a series of emergency steps taken by U.S. authorities to quell a year-long credit crisis that has helped push many economies toward recession. [ID:nN07479172]
“China has bought a lot of asset-backed securities, and there might be short-term improvement in price,” said He Fan, an economist with the Chinese Academy of Social Sciences.
But, taking a longer view, he said the bailout posed a problem: if the Treasury issues new debt to fund the rescue, should China be a buyer or not?
“For China, whether or not you buy the new treasuries, there will be losses: if you buy them, you’re getting deeper in the hole; if you don’t buy, your existing holdings will lose value,” He said.
THE events of the weekend begin the greatest intervention in the US economy by the Federal Government since the Great Depression, with the Bear Stearns rescue but a splutter on this road we must now travel.
If you were wondering what all the flag-waving at the Republican convention has been about, it is now clear. Americans are waving goodbye to the prosperity the nation has enjoyed since the Great Depression and a final goodbye to democracy. But while preparation for the most important decision made in the nation’s post-depression financial history towered above the conventions, I don’t think the fate of Freddie and Fannie and the remaining government-sponsored enterprises (GSEs) was mentioned during either convention.
And the politicians. President Bush has long authorised the Treasury to open its purse strings and, naturally, Treasury Secretary Henry Paulson said he did not expect the line of endless taxpayer credit to be used. This is like signing an authority to go to war and saying we don’t expect to go to war. Once the authority is given, it will happen. It was always laughable to expect otherwise. Paulson “briefed” John McCain and Barack Obama on the “plan”. The fact is that while America, and the world, wait to see who will govern, Mr Paulson has decided to take matters out of the politicians’ hands.
They willingly agreed. The ultimate political power, to spend taxpayers’ money, has been tossed away. Obviously the economy is too important to be left to the politicians. Instead it is to be put into “conservatorship”. It has come to this.
USA TODAY WASHINGTON – The unprecedented federal takeover of mortgage giants Freddie Mac and Fannie Mae announced on Sunday is a bold attempt to stabilize financial markets and restore the faltering housing market, but it thrusts trillions of dollars of risk directly onto taxpayers’ shoulders.
“You can call it a bailout, you can call it a safety net or you can call it a rescue package, but the bottom line is the American taxpayer is left footing the bill,” says Richard Yamarone, director of economic research at Argus Research.
The nationalization of Fannie Mae and Freddie Mac shows that the U.S. is “more communist than China right now” but its brand of socialism is meant only for the rich, investor Jim Rogers, CEO of Rogers Holdings, told CNBC Europe on Monday.
“America is more communist than China is right now. You can see that this is welfare of the rich, it is socialism for the rich… it’s just bailing out financial institutions,” Rogers said.
Stock markets jumped after the U.S. government’s decision to launch what could be its biggest federal bailout ever, in a bid to support the housing market and ward off more global financial market turbulence.
But Rogers said in the long term the move spelled trouble.
“This is madness, this is insanity, they have more than doubled the American national debt in one weekend for a bunch of crooks and incompetents. I’m not quite sure why I or anybody else should be paying for this,” Rogers told “Squawk Box Europe.”
European stocks soared on Monday, led by banks. UBS was up 11 percent, BNP Paribas up 8 percent, Credit Agricole up 11.1 percent and HBOS up 13.8 percent.
“You certainly gonna see a huge jump in any financial institutions which owned a lot of Fannie [FNM 0.75 -6.29 (-89.35%) ] or Freddie [FRE 0.75 -4.35 (-85.29%) ] … because they don’t have to worry about going bankrupt all of a sudden,” Rogers said.
“Bank stocks around the world are going through the roof, that’s ’cause they’ve all been bailed out. You don’t see the homeowners in Kansas going through the roof ’cause they’re not being bailed out,” he added.
Sept. 7 (Bloomberg) — William Poole, former president of the Federal Reserve Bank of St. Louis, said taxpayers may face a $300 billion bill to revive Fannie Mae and Freddie Mac, the mortgage giants being taken over by the Federal government.
“I would not be surprised if their total losses aggregate about 5 percent of their obligations” of about $6 trillion, Poole said today in an interview on Bloomberg Radio. “Five percent does not seem to me to be an outrageous guess.”
Treasury chief Paulson unveils historic government takeover of twin mortgage buyers. Top executives are out.
NEW YORK (CNNMoney.com) — Federal officials on Sunday unveiled an extraordinary takeover of Fannie Mae and Freddie Mac, putting the government in charge of the twin mortgage giants and the $5 trillion in home loans they back.
The move, which allows the Treasury to provide as much as $200 billion in capital to the two companies, marks Washington’s most dramatic attempt yet to shore up the nation’s housing market, which is suffering from record foreclosures and falling prices.
THE US TREASURY will today announce a rescue of Fannie Mae and Freddie Mac, two giant American mortgage banks, in what is likely to be the biggest financial bail-out of recent history.
The move may trigger a bounce in global stock markets tomorrow. However, analysts warn that some of the uncertainties that plagued the markets last week, including worries over the duration of the credit crunch, will persist.
WASHINGTON – An industry group says a record 9.2% of American homeowners with a mortgage were either behind on their payments or in foreclosure at the end of June, as damage from the housing crisis continued to mount.
The latest quarterly snapshot by the Mortgage Bankers Association on Friday broke records for late payments, homes entering the foreclosure process and for the inventory of loans in foreclosure.
Son of presidential nominee John McCain was reportedly former board member; closing marks the 11th bank failure this year.
WASHINGTON (AP) — Regulators on Friday shut down Silver State Bank, saying the Nevada bank failed because of losses on soured loans, mainly in commercial real estate and land development.
It was the 11th failure this year of a federally insured bank.
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-6.29 (-89.35%) 
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