Fannie, Freddie insolvent, Poole tells Bloomberg

(Reuters) – Mortgage lenders Fannie Mae and Freddie Mac are “insolvent” and may need a U.S. government bailout, former St. Louis Federal Reserve President William Poole was quoted as saying in an interview with Bloomberg.

“Congress ought to recognize that these firms are insolvent, that it is allowing these firms to continue to exist as bastions of privilege, financed by the taxpayer,” Poole was quoted as saying in an interview held on Wednesday.

Chances are increasing that the government may need to bail out the two mortgage companies, Poole was quoted as saying.

Shares of the two companies have taken a beating recently on worries about whether they can withstand more losses and support housing as well as concerns that they may need to raise massive amounts of new capital.

Freddie Mac shares tumbled 23.8 percent to $10.26 on the New York Stock Exchange on Wednesday, while Fannie Mae shares sank 13.1 percent to $15.31.

Related article: US: Total Crash of the Entire Financial System Expected, Say Experts

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S&P 500 plunges into a bear market

NEW YORK (Reuters) – Stocks tumbled on Wednesday, dragging the S&P 500 into a bear market, as worries about more credit losses hurt financial companies and Cisco Systems led technology shares lower after its CEO raised fears of an extended economic downturn.

The S&P closed 20 percent below its all-time high set in October, making it the last of the three major U.S. stock indexes to fall into a bear market. Stocks have been roiled for months by the credit crisis and a severe U.S. economic slowdown.

Related article: US: Total Crash of the Entire Financial System Expected, Say Experts

In the latest news to scare the market, Cisco’s (CSCO.O: Quote, Profile, Research, Stock Buzz) John Chambers told Reuters that customers of the company, which makes Internet infrastructure, see the economy picking up early in 2009 rather than later this year. At least two brokerages also cut their price targets on the stock.

Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz) dropped sharply as some investors worried that the two pillars of the U.S. housing market will need to raise billions of dollars in additional capital through stock sales, diluting the holdings of current investors.

Merrill Lynch (MER.N: Quote, Profile, Research, Stock Buzz) shares fell more than 9 percent, after Fitch Ratings said it may cut the U.S. investment bank’s debt rating, given expected ongoing write-downs and diminished prospects for earnings.

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Up to 25,000 on Wall St. face the axe, report says

NEW YORK-New York City’s financial sector might only slice 15,000 to 25,000 jobs in the current downturn, which could prove shorter than the mayor has predicted, the city comptroller said.

In contrast, the financial sector that is such a vital part of the city’s economy slashed 40,200 jobs in the previous 2000 to 2003 retreat that straddled the Sept. 11, 2001 air attacks, Comptroller William Thompson said in a report.

Battered by profit-gouging subprime mortgage loans, New York Stock Exchange member firms that do business with the public lost $7.3 billion (U.S.) last year, and the current job-losing cycle that began in August 2007 should run through March 2009, Thompson added.

Read moreUp to 25,000 on Wall St. face the axe, report says

NYC Is Getting a New High-Tech Defense Perimeter.

Photo: Vincent Laforet

At the southernmost end of Brooklyn, just off Dead Horse Bay, there’s a weather-beaten helipad where the New York Police Department keeps a gray unmarked twin-engine Bell 412 helicopter. Detective Brendan Galligan ushers me aboard. “We don’t really let people see this,” he says.

We climb in behind the pilot and find ourselves facing a console with three screens: One shows a map of the city; another, an interface for checking license plates and addresses; and the third, the view from a gyro-stabilized L-3 Wescam camera attached to the chopper’s nose. The camera can see clear across the city, in both the visible and the infrared slices of the spectrum; then it can broadcast the images to police headquarters using an onboard microwave transmitter.

The helicopter, part of New York City’s antiterror arsenal, takes off and climbs to 1,000 feet in the afternoon sunshine. Passing the Verrazano-Narrows Bridge, Galligan scans for suspicious trucks lingering on approach ramps. Over the Staten Island Ferry, he explains how police routinely use the chopper to look for boats that might be trailing too closely. Then, as we swing past the gaping World Trade Center site, the 22-year veteran adjusts the joystick to turn the camera eastward, filling the third screen with the towers of lower Manhattan: the center of the center of the bull’s-eye.

The New York Stock Exchange, the American Stock Exchange, the Federal Reserve Bank, City Hall, four major bridges and tunnels — a bomb at any of these places could kill hundreds, cost the city billions, and rattle the world financial system. Al Qaeda has hit lower Manhattan twice, in 1993 and 2001, and officials say that several other plots have been broken up since.

City agencies have done their best to harden the financial district in the years since 2001. Today, explosives-sniffing dogs and two truckloads of cops wearing military-style body armor and waving M-4 machine guns surround the flag-draped stock exchange. Black metallic barriers rise out of the asphalt, blocking traffic on Wall Street, while concrete planters and strategically parked trucks keep vehicles off Broad Street. Some of the other streets surrounding the exchange have been cut off to pedestrians, and only invited guests are allowed inside. “Closed since 9/11,” the guard tells visitors.

But you can’t block off every street or have a guard by every door. There’s no budget for that, and no one would want to live or work in that kind of armed camp anyway. “You can make a justification for putting bollards in front of every building,” says a former high-ranking NYPD counterterrorism official. “But pretty soon you can’t walk anywhere. People leave.”

So New York has an audacious blueprint to wrap a high tech cloak around lower Manhattan. It will provide the most sophisticated armor of any major urban area in the world — one that relies on brains as much as brawn, on barely visible technology as much as brute stopping power. And the chopper I’m in will be just a small piece of it.

Read moreNYC Is Getting a New High-Tech Defense Perimeter.

Big Traders Dive Into Dark Pools

The alternative trading systems are luring big institutional customers by offering greater privacy and lower costs. Their growth could affect big exchanges.It’s not easy being a big player in the stock market. Trading huge quantities of stock on traditional exchanges has become ever more challenging, costly, and potentially disruptive. And if other players see your moves, they can disrupt your trades. That’s led to the emergence in recent years of alternative trading systems known as dark pools. And their growth could have significant implications for big stock exchanges-and individual investors.

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Endgame: Unregulated Private Money Creation

The Financial Tsunami, Part IV.What had emerged going into the new millennium after the 1999 repeal of Glass-Steagall was an awesome transformation of American credit markets into what was soon to become the world’s greatest unregulated private money creation machine.

The New Finance was built on an incestuous, interlocking, if informal, cartel of players, all reading from the script written by Alan Greenspan and his friends at J.P. Morgan, Citigroup, Goldman Sachs, and the other major financial houses of New York. Securitization was going to secure a “new” American Century and its financial domination, as its creators clearly believed on the eve of the millennium.

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