Tag: bernanke
Sen Sanders questions Fed Chairman Bernanke, March 3, 2009
by admin on Mar.11, 2009, under Uncategorized
The Federal Reserve is Bankrupt How Did It Happen and What are the Ugly Consequences?
by admin on Mar.11, 2009, under Uncategorized
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By Matthias Chang
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Global Research, March 10, 2009
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The Federal Reserve is bankrupt for all intents and purposes. The same goes for the Bank of England! This article will focus largely on the Fed, because the Fed is the “financial land-mine”. How long can someone who has stepped on a landmine, remain standing – hours, days? Eventually, when he is exhausted and his legs give way, the mine will just explode! The shadow banking system has not only stepped on the land-mine, it is carrying such a heavy load (trillions of toxic wastes) that sooner or later it will tilt, give way and trigger off the land-mine![1] In a recent article, I referred to the remarks of British Prime Minister Gordon Brown and President Obama calling for the shadow banking system to be outlawed. Even if the call was genuine, it is too late. The land-mine has been triggered and the explosion cannot be averted under any circumstances. The only issue is the extent of the damage to the global economy and how long it will take for the world to recover from this fiasco – a financial madness that has no precedent. The great depression is “Mary Poppins” in comparison! The idea of a central bank going bankrupt is not that outlandish. I am by no means the first author who has given this stark warning. What underlies this crisis (which I initially examined in an article in December 2006) is the potential collapse of the global banking system, specifically the Shadow Money-Lenders. Nouriel Roubini, the New York University professor said [2]:
Please read the underlined words again. “Sovereign bank” means central bank. When a central bank “cracks” i.e. becomes insolvent, “all hell breaks lose”, because as the professor correctly pointed out, “any government guarantees will ring hollow and will be useless”. If a central bank goes belly up, it is as good as the government going bankrupt. Period! In another article, Roubini admitted that the pressure on “the financial land-mine” is totally unbearable. He wrote: “The US Financial system is effectively insolvent”. It follows that if the financial system is bankrupt, it is a matter of time before the “sovereign bank” goes belly up. This is a given! He stated further that:
McClatchy newspaper reported (03/08/2009) bad news affecting the banks:
Berkshire Hathaway Chairman, Warren Buffett is so livid by the sheer magnitude of the financial mess that he said:
The above bad news refers to the losses and potential losses that the big banks have suffered and will suffer in the near future. But what is overlooked by many financial analysts is that these very same derivative products have caused another financial organ failure. And there is no way that the said organ can be resuscitated to its former state of health.
The Repo Market is gridlocked! There has been an incestuous relationship between the traditional banking system and the shadow banking system and the link that joined the two together is the Repo Market.[Repurchase Market] This is in fact the weakest link in the entire financial system. This is a very technical subject and I seek your indulgence and patience when reading the remaining part of this article. The gridlock of the repo market is the basis for my assertion that over and above the aforesaid dire financial facts, it is the major contributing factor to the bankruptcy of the Federal Reserve! I want to use a simple analogy. This will make the issue easier to understand. Picture a one-inch diameter thick rope. Such a rope is made up of a few strands of narrower ropes, say 1/10th inch which are twined together to make the thick one-inch diameter rope. Picture again that all the outer strands have been burnt away, and what remains is the middle strand, still lifting the weight. But this strand cannot on its own, lift such a weight and sooner or later, it will snap. When that happens, the weight will come crashing down! The middle strand is the repo market. Alternatively, you can use the analogy that the repo market is the heart that pumps the blood (the cash flow). The financial system is the body and it has suffered a massive heart attack! What is the repo market? The repo market is the market whereby all financial institutions (regulated and unregulated) invariably go to obtain financing to meet reserve requirements, bridging finance, to lend or purchase securities, to hedge and or to invest on short-term basis. It used to be that mainly US Treasuries (bear this in mind at all times) were used as security for Repo transactions, as it is considered as most secure i.e. as good as cash since it is backed by the credit of the US government! This requirement is no longer the case. More of this issue later. The Nature of Repo Transactions In repo transactions, securities are exchanged for cash with an agreement to repurchase the securities at a future date. The securities serve as collateral for what is effectively a cash loan. A distinguishing feature of repos is that they can be used either to obtain funds or to obtain securities. As repos are short-maturity collateralized instruments, repo markets have strong linkages with securities markets, derivative markets and other short term markets such as inter-bank and money markets. [3] Like other financial markets, repo markets are subject to credit risks, operational risks and liquidity risks. However, what distinguishes the credit risks on repos from that associated with uncollateralized instruments is that repos credit exposures arise from volatility (or market risk) in the value of collateral. Bear this in mind at all times. Repos allow institutions to use leverage to take larger positions in financial markets which could add to systemic risks. Bear this in mind at all times. And because of the close linkages between repo markets and securities markets, any shocks will be transmitted quickly, resulting in a gridlock. Bear this in mind at all times. Transactions covered by definition of repos are as follows:
(A) Repurchase Agreement A repurchase agreement involves the sale of an asset under an agreement to repurchase the asset from the same counter-party. Interest is paid on the repurchase agreement by adjusting the sale and purchase price. A reverse repo is the purchase of an asset with an agreement to re-sell the same or a similar asset.
A hold-in-custody repurchase agreement is a trade whereby the repoer (the borrower of cash) continues to hold the collateralizing securities in custody for the lender of cash. The risks are obvious!
A deliver-out repurchase agreement is where securities are delivered to the cash lender for custody in exchange for cash.
A tri-party repurchase agreement is similar to a deliver-out repurchase agreement, except that the security is placed in the custody of a third-party entity. The third-party ensures that the security meets the cash lender’s requirements and provides valuation and margining services. This is the primary form of repurchase agreement for securities dealers in the United States. Bank of New York and JP Morgan Chase are the two main custodians or clearing banks in the US and supervise the vast majority of the tri-party repos. Bear this in mind at all times.
(B) Sell/Buy-Back Agreement A sell buy-back is two distinct outright cash market trades, one for forward settlement. The forward price is set relative to the spot price to yield a market rate of return.
(C) Securities Lending This is where the owner of the security lends them to another person in return for a fee. The borrower of the security is contractually obliged to redeliver a like quantity of the same securities, or return precisely the same securities. Repos can be of any duration but are most commonly over-night loans. Repos longer than over-night are called Term Repos. There are also Open Repos which are transactions which can be terminated by both parties on a day’s notice. The largest players of repos and reverses are the dealers in government securities. There are about 20 primary dealers recognised by the Fed which are authorised to bid for new-issued treasury securities for resale in the market. The dealers are highly leveraged, 50 to 100 times their own capital. To finance the purchase of treasury securities, the dealers need to have repo monies in large amounts on a continuing basis. The institutions that supply such huge funds in the repo market are money funds, large corporations, state and local governments and foreign central banks. The Repo Market and the Financial Crisis As stated earlier when the repo market first started, US treasuries were the preferred security. But when financial engineering exploded and many financial products (i.e. CDOs) were rated AAA by rating agencies, these securities were also traded as described above in the repo market. This was when problems started. According to Gary Gorton [4], the repo market before the crisis was estimated to be worth a whopping $12 trillion as compared to the total assets in the entire US banking system of $10 trillion. The former CEO of Federal Reserve Bank of New York (NYFRB) and now the US Treasury Secretary, Tim Geithner observed in 2008:
Economic historians will argue for another century as to the cause for the run on the repo market. The collapse of Bear Stearns is as good a starting point as any. When the market discovered that its securities were duds, pure junk, shock waves ripped through the system. Recall that I had mentioned earlier that Federal Bank of New York and JP Morgan Chase were the primary clearing banks for repos. The Fed’s rescue of Bear Stearns through JP Morgan was not so much to save the former but rather to shore up the “clearing system” of the repos for which JP Morgan Chase and the Bank of New York were the main pillars. One of the functions of a “clearing bank” for repos is to value and match securities tendered for cash borrowings. If Bear Stearns securities are now valued as junks, the integrity of JP Morgan and Federal Bank of New York as clearing banks in this market is as good as zero! And bearing in mind that the five major investment banks in the US rely heavily on the repo market for their funding, any gridlock in this part of the shadow banking system would tear wide open the entire banking system, including the traditional counter-part. Hence, the FED intervention by the creation of the Primary Dealer Credit Facility (PDCF) which was in effect the backstop for all investment banking using tri-party repos! This was what Bernanke said:
Louis Crandall, economist at Wrightson ICAP observed:
The inherent weakness of tri-party repos is that the counter-party risks of billions worth of funding agreements are shouldered by essentially two players – Federal Bank of New York and JP Morgan Chase. Yet, way back then, they were held up as rock solid. It is almost hilarious to read the then advert of the Federal Bank of New York as to their expertise and service:
Panic swept across the entire repo market. No securities were considered safe enough for repos except US treasuries. Fundings in the repo market grind to a halt. Market players withdrew funds and began hoarding treasuries. The rest who own structured products were slaughtered. I would like to quote Gary Gorton again:
This change led to a sharp increase in the demand for government securities for repo transactions, which was compounded by significantly higher safe-haven demand for US Treasuries and the increased unwillingness to lend such securities in repo transactions. As the crisis unfolded, this combination resulted in US government collateral becoming extremely scarce. [6] I will now turn to the issue of the FED’s solvency. As has been observed, the Fed intervened aggressively to check the run on the repo market. Various measures were taken, but in my view the most dangerous was the widening of the collaterals which the Fed was willing to accept to secure funding of the players in the repo market. The Fed also intervened by lending a huge chunk of its US treasuries in exchange for junks to facilitate credit expansion.
In the result, what happened was that the Fed’s present balance sheet of approximately $2 trillion is made up mostly of junk securities. The Fed is no different from banks in that confidence in the quality of its assets is critical and that if and when the market recovers, there is in fact a market for the junk assets that it took on to unravel the gridlock in the financial markets. By way of analogy, if your high street bank’s balance sheet is made up of junk, what would you do? There are just not enough assets to meet its liabilities. But of course, one can argue that the Fed is not your high street bank. It is the central bank of the mighty USA. It will always be able to “print money” or “digitalise” money and keep the markets going. But beware that the Federal Reserve Note is mere paper, fiat money which cannot be redeemed for anything tangible such as gold. And although it is stated boldly in the notes issued - “In God we trust” - you and I are not actually placing our trust in God when accepting the Federal Reserve Notes as “money”. When Joe Six-Packs realises that the Federal Reserve Note is not even secured by US treasuries and or the FED has real tangible assets, but its balance sheet is littered with junks and toxic waste, there will be a run on the Fed i.e. when Americans and foreigners no longer have faith in the Federal Reserve Notes as “money”. If confidence could vaporise in a second and cause a stampede in what was once considered solid security, the triple A rated bonds in the repo and money markets, the same confidence that is now reposed in the Federal Reserve Notes can likewise disappear into the memory hole. All these years, the con was maintained by the Fed that it was solid because it has on its balance sheet over $800 billion of US treasuries i.e. its notes “were so-called backed by these treasuries”. It could sell its treasuries in the repo market for cash and thereby control the money flows in the economy and vice versa. In their subconscious mind, Americans and stupid foreign central banks and their executives (brain-washed by the Chicago School of Economics) somehow believe in the infallibility of the Fed. Now it has been exposed that the Fed’s “assets” comprise of junk bonds and toxic wastes. The Emperor has no clothes! Paul Volcker, former Chairman of the Federal Reserve may have given the ultimate epitaph: “The bright new financial system – for all its talented participants, for all its rich rewards – has failed the test of the market place.” And it is any wonder that Professor Nouriel Roubini declared:
In my opinion, the Fed has already become “unglued”. Whatever guarantees given to secure the indebtedness of CitiGroup and others to prevent a run on these banks are useless. It is bankrupt! End Notes [1] There are two banking systems in existence today. The Traditional Banking System – i.e. High Street banks and the Shadow Banking System. But the players in both the systems overlap because, the major banks of the traditional system helped spawn the shadow banking system. In fact they are the key players in the use of the so-called “new financial products, the CDOs, CLOs, MBS” etc and which have now turned toxic – worthless, junk to be exact. Matthias Chang is a prominent barrister, author and analyst of the New World Order based in Malaysia.
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Bill Seeks to Let FDIC Borrow up to $500 Billion
by admin on Mar.09, 2009, under Uncategorized
By DAMIAN PALETTA
MARCH 6, 2009
WASHINGTON — Senate Banking Committee Chairman Christopher Dodd is moving to allow the Federal Deposit Insurance Corp. to temporarily borrow as much as $500 billion from the Treasury Department.
The Connecticut Democrat’s effort — which comes in response to urging from FDIC Chairman Sheila Bair, Federal Reserve Chairman Ben Bernanke and Treasury Secretary Timothy Geithner — would give the FDIC access to more money to rebuild its fund that insures consumers’ deposits, which have been hard hit by a string of bank failures.
More
* FDIC Letter to Dodd
* Q&A: How Safe is Your Bank Account?
* Graphic: Banks That Went Bust
Discuss
* What’s the best place for your money right now?
Last week, the FDIC proposed raising fees on banks in order to build up its deposit insurance fund, which had just $19 billion at the end of 2008. That idea provoked protests from banks, which said such a burden would worsen their already shaken condition. The Dodd bill, if it becomes law, would represent an alternative source of funding.
Mr. Dodd’s bill could also give the FDIC more firepower to help address “systemic risks” in the economy, potentially creating another source of bailout funds in addition to the $700 billion already appropriated by Congress.
Mr. Bernanke said in a Feb. 2 letter to Mr. Dodd that such a “mechanism would allow the FDIC to respond expeditiously to emergency situations that may involve substantial risk to the financial system.”
The FDIC would be able to borrow as much as $500 billion until the end of 2010 if the FDIC, Fed, Treasury secretary and White House agree such money is warranted. The bill would allow it to borrow $100 billion absent that approval. Currently, its line of credit with the Treasury is $30 billion.
The FDIC’s deposit-insurance fund has fallen precipitously with 25 bank failures in 2008 and 16 so far in 2009. Some bank failures have a bigger impact on the fund than others, as IndyMac’s failure cost the fund more than $10 billion, while many others cost the fund less than $100 million.
A 1991 law generally caps the amount of money the FDIC can borrow from the Treasury at $30 billion, and the FDIC hasn’t borrowed money from the Treasury in more than a decade.
Ms. Bair said a change in the law would give the FDIC more options to determine the best way to rebuild its depleted fund. In an interview, she stressed that all insured deposits were already backed by the “full faith and credit of the United States government.”
A change in the law would ease “the mechanics of how seamlessly we can access our lines of” funding. “I’m the kind of person that likes to be prepared for all contingencies,” she said.
Government to up Citi stake to 36 percent
by admin on Mar.03, 2009, under Uncategorized
Pittsburgh Business Times
The government will increase its stake in Citigroup Inc. through an exchange that will see an exchange of preferred securities for common stock.
Citi will exchange common stock for up to $27.5 billion of its existing preferred securities and trust preferred securities at $3.25 a share. The U.S. government will match this exchange up to $25 billion at the same conversion price.
Should the government exchange the maximum amount, it would up its stake from about 8 percent to about 36 percent.
The move is being made to increase the bank’s tangible common equity.
“While we believe Tier 1 capital remains the most important measure of the financial strength of banks, we recognize that the markets also view Tangible Common Equity as an important measure. This transaction – which requires no additional investment from U.S. taxpayers – does not change Citi’s strategy, operations or governance,” Citigroup Chief Executive Officer Vikram Pandit said in a statement.
The move comes on the same day that Citi said it recorded a pre-tax goodwill impairment charge of $9.6 billion, which increased the bank’s fourth-quarter loss to $27.7 billion, or $5.59 a share.
New York Times Falsifies History of Federal Reserve
by admin on Feb.27, 2009, under Uncategorized
By Michael Collins Piper
The New York Times published a flat-out untruth on Feb. 7 about the Federal Reserve Act of 1913. And the untruth came from the pen of a distinguished American academic who is author of many much-touted works of history.
In a commentary in the Times, entitled “The Value of Other People’s Money,” Dr. Melvin I. Urofsky, a professor at Virginia Commonwealth University, reflected on the origins of the congressional measure that created the Federal Reserve System. He said that the measure “allowed Congress to take away banks’ control over currency.” In fact, nothing could be further from the truth.
Dr. Urofsky was dead wrong. The New York Times was guilty of perpetrating a falsehood, something which should come as no surprise, considering the fact that The New York Times—which fancies itself America’s newspaper of record—has long been the daily media voice in the United States of the international banking dynasties that control the American money system through their domination of the Fed.
The truth about the nature of the Fed is no secret to Americans who have access to independent newspapers such as AMERICAN FREE PRESS, historical journals such as THE BARNES REVIEW and radio outlets such as Republic Broadcasting (which can be found on the Internet at republicbroadcasting.org).
In fact, as far back as the 1920s, the great American industrialist Henry Ford was warning Americans of the venal nature of the Fed and the plutocratic money masters who created the Fed and who controlled it then as they do today. Ford wrote:
What the people of the United States do not understand and never have understood is that while the Federal Reserve Act was governmental, the whole Federal Reserve System is private. It is an officially created private banking system.
Examine the first 1,000 people you meet on the street, and 999 of them will tell you that the Federal Reserve System is a device whereby the United States government went into the banking business for the benefit of the people. They have an idea that like the Post Office and the Custom House the Federal Reserve is part of the government’s official machinery. . . .
Take up the standard encyclopedias and while you will find no misstatements of fact in them, you will find no statement that the Federal Reserve System is a private banking system; the impression carried away by the lay reader is that it is a part of the government.
The Federal Reserve System is a system of private banks, the creation of a banking aristocracy within an already existing system of aristocracy, whereby a great proportion of banking independence was lost, and whereby it was made possible for speculative financiers to centralize great sums of money for their own purposes, beneficial [to the people of the United States] or not.
In addition, while there has been much written on the Federal Reserve and the reality of what it constitutes— a privately owned and privately controlled money monopoly in the hands of banking institutions—the fact that the Rothschild family of Europe was, ultimately, the primary force behind the establishment of the system on American soil, is not something that is fully understood.
For example, because there were no people named “Rothschild” at the famous meeting off the coast of Georgia at Jekyll Island where the framework for the Federal Reserve was put forth and where the planning for the Federal Reserve Act of 1913 established the Fed, there are those who would divorce the Rothschild family altogether from the circumstances. However, the fine hand of Rothschild was indeed on the scene, represented by Paul Warburg of the New York-based Kuhn, Loeb Company, which was under the control of longtime Rothschild associate Jacob Schiff.
http://www.americanfreepress.net/html/new_york_times_falsifies_169.html
Bernanke again spurns talk of bank nationalization
by admin on Feb.26, 2009, under Uncategorized
Associated Press
12:41 PM PST, February 25, 2009
WASHINGTON — Federal Reserve Chairman Ben Bernanke today again spurned speculation that the government may nationalize Citigroup or other big banks.
When asked about Citigroup during a House Financial Services Committee hearing, Bernanke said nationalization “is when the government seizes the bank and zeros out the shareholders and begins to manage and run the bank. And, we don’t plan anything like that.”
But Bernanke told lawmakers it is possible the government could end up with a much bigger ownership stake in Citigroup Inc. or other banks.
In the case of Citigroup, Bernanke said: “We’ll see how their test works out and what evolves.”
The Fed chief was referring to new “stress tests” that regulators will start conducting on the biggest banks to judge whether they can hold up if the recession were to worsen.
The tests, which should be completed by the end of April, will help regulators decide whether the banks have sufficient capital — and the right mix of it — to withstand any additional shocks to the economy over the next two years.
The results will help regulators decide whether banks may need additional assistance so they can carry out the critical mission of boosting lending to customers, a key ingredient to the economic turnaround.
Bernanke told the House panel that if the stress test reveals that a bank needs more capital, it will have up to six months to raise the money from private companies. If it can’t, then the government would provide assistance.
One option for help, laid out by the Obama administration Monday, would allow the government to sharply increase its stake in banks. That would be done by converting the government’s stock in banks from preferred to common shares.
The strategy, which could be applied retroactively to banks that received money in the first incarnation of the bailout, would give the government voting shares and more say in a bank’s operations.
Some banks — after they complete their stress tests — won’t need additional help, Bernanke said.
However, “it may be the case that the government will have a substantial minority share in Citi or other banks,” Bernanke said.
“But again, we have the tools … to make sure that we get the good results we want in term of improved performance without all the negative impacts of going through a bankruptcy process or some kind of seizure, which would be, I think, disruptive to the market.”
Citigroup has been involved in talks with regulators over ways the government could help strengthen the bank, including use of the stock conversion plan. New York-based Citigroup already has received $45 billion in bailout money, plus guarantees to cover losses on hundreds of billions of dollars in risky investments.
On the housing front, Bernanke said the glut of unsold homes currently on the market could drive down prices far too much. The problems “could put us in real danger of driving housing well below fundamentals,” he said.
The National Association of Realtors said Wednesday that sales of existing homes fell 5.3 percent to an annual rate of 4.49 million last month, from 4.74 million in December. It was the weakest showing since July 1997.
The median sales price in January plunged to $170,300, down 14.8 percent from $199,800 a year earlier and from $175,000 in December. That was the lowest price since March 2003 and the second-largest drop on record.
The number of unsold homes on the market fell almost 3 percent last month to 3.6 million. But due to the slumping sales pace, it would still take 9.6 months to rid the market of all of those properties, up from 9.4 months in December.
http://www.latimes.com/business/la-fi-bernanke26-2009feb26,0,4281624.story
Stocks up on Bernanke remarks; focus now on Obama
by admin on Feb.26, 2009, under Uncategorized
- Tuesday February 24, 2009, 6:37 pm EST
NEW YORK (AP) — Federal Reserve Chairman Ben Bernanke gave Wall Street a double dose of reassurance. Now it’s President Barack Obama’s turn.
Bernanke told Congress on Tuesday the recession might end this year, and that regulators aren’t planning to nationalize banks. The news alleviated some of investors’ worries about the economy and the banking industry, and lifted the Dow Jones industrial average and Standard & Poor’s 500 index off their lowest levels since 1997.
And investors are hopeful that Tuesday night, Obama will provide specifics about his plans to stabilize the financial system and further stimulate the economy. Anticipation of his remarks helped drive beaten-down financial shares up sharply.
“There’s growing optimism that Obama can deliver the details that the market is so desperately looking for in his speech,” said Ryan Larson, senior equity trader at Voyageur Asset Management. If it gets those details, Larson added, the market’s upward momentum could continue.
Stocks remain on shaky ground, however. Bernanke may have helped stem the market’s slide Tuesday, but the market also found stability from temporary technical factors: bargain-hunting, the unwinding of short bets, and selling exhaustion after six straight down days for the S&P 500.
And though it appears the government is trying to quash the notion of bank nationalization, the Obama administration still has not demonstrated how exactly it will repair the banking system. The nation’s financial system remains “zombie-like,” said Nick Kalivas, vice president of financial research at the brokerage MF Global.
“We had an up day today, but nothing has really changed on that front,” Kalivas said. “If nothing is articulated on that tonight, we’re moving to the downside again.”
The continued focus on the stability of the financial system comes a day after the government moved closer to dramatically expanding its ownership stakes in the nation’s banks, including Citigroup Inc. The Treasury Department, the Fed and other banking regulators said Monday they could convert the government’s stock in the banks from preferred shares to common shares.
The Dow rose 236.16, or 3.3 percent, to 7,350.94. On Monday, the major indexes tumbled more than 3 percent, including the Dow, which fell 251 points and hit its lowest close since May 7, 1997.
Broader stock indicators also rebounded Tuesday. The S&P 500 index rose 29.81, or 4 percent, to 773.14. On Monday, it logged its lowest finish since April 11, 1997.
The Nasdaq composite index rose 54.11, or 3.9 percent, Tuesday to 1,441.83, while the Russell 2000 index of smaller companies rose 17.90, or 4.5 percent, to 412.48.
Advancing issues outnumbered decliners by about 6 to 1 on the New York Stock Exchange, where consolidated volume came to 7.09 billion shares, compared with Monday’s 6.35 billion.
In his semiannual report to the Senate Banking Committee, Bernanke predicted the economy is likely to keep contracting in the first six months of 2009, but that “there is a reasonable prospect” the recession will end this year.
He warned that a recovery will require getting credit and financial markets to operate normally, and that the government must continue working with ailing banks to bring them back to profitability. To the market’s relief, though, the Fed chief said formally nationalizing the banks “just isn’t necessary.”
Traders were encouraged that the S&P 500 index has so far managed to stayed above its Nov. 21 trading low of 741.02. Investors searching for a recovery look for signs that market can test its lows from the worst of the credit crisis and then bounce higher.
Still, many analysts expect the market to remain volatile for the foreseeable future.
Rich Hughes, co-president of Portfolio Management Consultants in Los Angeles, said the market’s rallies are likely to be based on hope or on rebounds from selloffs. He contends Wall Street still hasn’t seen the wrenching decline that is often needed to scare investors from the market and set the ground for a lasting recovery.
“The underlying fundamentals just aren’t there to support anything that’s sustainable right now,” Hughes said. “We haven’t seen the capitulation that you’d want to see before you’d get thoroughly enthused.”
The market’s slide has been tough on long-term investors. A person who in 1997 put $50,000 in a fund that tracks the S&P 500 would now only have about $46,256.
Bond prices fell Tuesday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.80 percent from 2.76 percent late Monday. The yield on the three-month T-bill, considered one of the safest investments, was unchanged at 0.29 percent.
The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude rose $1.52 to $39.96 per barrel on the New York Mercantile Exchange.
Home Depot posted a loss but the nation’s largest home improvement retailer’s results topped expectations when excluding costs for shutting four home-improvement brands. The stock rose $1.96, or 10.5 percent, to $20.67.
Target Corp. and Macy’s Inc. said fiscal fourth-quarter earnings fell sharply as shoppers cut back on purchases. Office Depot Inc. posted a loss for the quarter. Target fell 60 cents to $27.83, while Macy’s rose 89 cents, or 12 percent, to $8.29.
Two big drags on the Dow this year — Citigroup and Bank of America Corp. — regained ground Tuesday. Citigroup rose 46 cents, or 22 percent, to $2.60, and BofA rose 82 cents, or 21 percent, to $4.73.
Another bank in the Dow, JPMorgan Chase & Co., rose $1.51, or 7.74 percent, to $21.02 after announcing late Monday it would slash its quarterly dividend to 5 cents from 38 cents in a move to save $5 billion a year.
The only loser in the Dow Tuesday was Microsoft Corp., which dipped 4 cents to $17.17 after it reiterated its belief that the economic crisis will persist at least into the second half of 2009.
Stocks fell in Asia and Europe following Monday’s drop on Wall Street. Japan’s Nikkei stock average fell 1.5 percent, Britain’s FTSE 100 fell 0.78 percent, Germany’s DAX index fell 0.73 percent, and France’s CAC-40 fell 0.73 percent.
http://finance.yahoo.com/news/Bernanke-Recession-may-end-in-apf-14453719.html/print
Fed says economy even worse than thought Gloomy assessment as governments consider bank nationalization
by admin on Feb.26, 2009, under Uncategorized
In a speech at the National Press Club, Federal Reserve Chairman Ben Bernanke pointed to “dismal” economic data while another top Fed official warned of the need for even more stimulus, even with interest rates set near zero…Meanwhile, in the wake of unsuccessful bank bailouts, governments increasingly are considering seizing control of the banks entirely, the Voice of America reports…In the U.S., former Federal Reserve Chairman Alan Greenspan told the Financial Times bank nationalization may be the only way to restore confidence to a shaken financial system.
Full article:
http://wnd.com/index.php?fa=PAGE.view&pageId=89296
Stocks jump after Bernanke says recession may end
by admin on Feb.26, 2009, under Uncategorized
NEW YORK (AP) — Federal Reserve Chairman Ben Bernanke has given Wall Street a double dose of reassurance. Bernanke told Congress Monday that the recession might end this year, and that regulators aren’t planning to nationalize banks.
The news alleviated some of investors’ deepening worries about the economy and the banking system, and the Dow Jones industrial average, coming off its lowest levels since 1997, jumped about 240 points. The Dow and other major stock indexes were up more than 3 percent, and financial stocks were soaring by double-digit percentages.
In his semiannual report to the Senate Banking Committee, Bernanke predicted the economy is likely to keep contracting in the first six months of 2009, but that “there is a reasonable prospect” the recession will end this year.
He warned that a recovery will require getting credit and financial markets to operate normally, and that the government must continue working with ailing banks to bring them back to profitability. To the market’s relief, though, the Fed chief said formally nationalizing the banks “just isn’t necessary.”
While Bernanke’s testimony helped ease some pressure on the market, it also came after days of heavy selling that left the Dow Jones industrial average and the Standard & Poor’s 500 index near 12-year lows, so a bounce in stocks wasn’t a surprise as bargain-hunting traders picked up pummeled shares. Some better-than-expected quarterly numbers from Home Depot Inc. also helped lift the market’s mood.
The market grew more upbeat as well ahead of a speech by President Barack Obama scheduled for 9 p.m. EST. Beaten-down financial shares gained as the White House said Obama will provide more details about his plans to help stabilize the financial system. The President is also expected to make the case that more has to be done to revive the economy.
“There’s growing optimism that Obama can deliver the details that the market is so desperately looking for in his speech,” said Ryan Larson, senior equity trader at Voyageur Asset Management. If it gets those details, he added, the market’s upward momentum could continue.
The continued focus on the stability of the financial system comes a day after the government moved closer to dramatically expanding its ownership stakes in the nation’s banks, including Citigroup Inc. The Treasury Department, the Fed and other banking regulators said Monday they could convert the government’s stock in the banks from preferred shares to common shares.
In late afternoon trading, the Dow rose 244.84, or 3.44 percent, to 7,359.62. On Monday, the major indexes tumbled more than 3 percent, including the Dow, which fell 251 points. It was the lowest close for the blue chips since May 7, 1997.
Broader stock indicators also rebounded Tuesday. The S&P 500 index rose 28.49, or 3.83 percent, to 771.82. On Monday, it logged its lowest finish since April 11, 1997.
The Nasdaq composite index rose 53.49, or 3.85 percent, Tuesday to 1,441.21.
The Russell 2000 index of smaller companies rose 17.62, or 4.47 percent, to 412.20.
Advancing issues outnumbered decliners by about 6 to 1 on the New York Stock Exchange, where volume amounted to 1.37 billion shares.
Some traders were encouraged after the S&P 500 index on Monday managed to stay just above its Nov. 21 trading low of 741.02. Investors searching for a recovery look for signs that market can test lows and then bounce higher.
It was a welcome sign after the Dow industrials last week fell below their Nov. 21 lows.
Still, many analysts expect the market to remain volatile for the foreseeable future.
Rich Hughes, co-president of Portfolio Management Consultants in Los Angeles, said the stock market’s rallies are likely to be based on hope or on rebounds from selloffs. He contends Wall Street still hasn’t seen the wrenching decline that is often needed to scare investors from the market and set the ground for a lasting recovery.
“The underlying fundamentals just aren’t there to support anything that’s sustainable right now,” Hughes said. “We haven’t seen the capitulation that you’d want to see before you’d get thoroughly enthused.”
The market’s slide has been tough on long-term savers. An investor who in 1997 had $50,000 in a fund that tracks the S&P 500 would have lost money; the fund would now be worth $46,256. Still, stocks tend to perform better after steep pullbacks and their long-term returns often outpace other investments.
Bond prices fell Tuesday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.80 percent from 2.76 percent late Monday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.32 percent from 0.29 percent Monday.
The dollar was mixed against other major currencies, while gold prices rose.
Light, sweet crude rose $1.52 to $39.96 per barrel on the New York Mercantile Exchange.
Home Depot posted a loss but the nation’s largest home improvement retailer’s results topped expectations when excluding costs for shutting four home-improvement brands. The stock rose $1.97, or 10.5 percent, to $20.68.
Target Corp. and Macy’s Inc. said fiscal fourth-quarter earnings fell sharply as shoppers cut back on purchases. Office Depot Inc. posted a loss for the quarter. Target rose 4 cents to $28.47, while Macy’s rose 83 cents, or 11.2 percent, to $8.23.
Citigroup Inc. was up 40 cents, or 18.7 percent, at $2.54. Bank of America Corp. rose 78 cents, or nearly 20 percent to $4.69.
JPMorgan Chase Co. rose $1.40, or 7.18 percent, to $20.91 after announcing late Monday it would slash its quarterly dividend to 5 cents from 38 cents in a move to preserve capital to protect itself should the ongoing recession worsen. The decision will save the bank about $5 billion per year.
Stocks fell in Europe after Monday’s drop on Wall Street. Britain’s FTSE 100 fell 0.78 percent, Germany’s DAX index fell 0.73 percent, and France’s CAC-40 fell 0.73 percent. Earlier, Japan’s Nikkei stock average fell 1.5 percent.
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