Madness

Yesterday I wrote that "Bush has done to the US economy what no terrorist or hostile country could ever do, that's quite a legacy!"I was wrong, Bush merely loaded the gun; Congress, in an act of collective madness, has in effect destroyed the US economy by voting against the bailout plan.Given that the plan was the only one on the table, one might ask why they jettisoned their only hope. Regrettably partisan politics outweighed commonsense and selflessness, as the Republicans used a speech by Nancy Pelosi (seemingly she hurt their feelings) as...

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The Great Bailout

US President George Bush has said that Democrats and Republicans will come together to pass the bailout plan to rescue the US economy.All well and good, if what he says actually comes to pass. However, the bailout was never a matter of merely throwing billions at the problem to make it go away but of injecting confidence into the economy.The bailout plan had the possibility of working, until it became apparent that Paulson in fact had no plan and McCain pushed himself in front of the cameras in a bid to appear as a dealmaker (thus wrecking any...

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Time Running Out For Bradford and Bingley

Bradford and Bingley have announced that their mortgage processing centre in Borehamwood, Hertfordshire, is to be closed and the 300 staff made redundant. It seems that it does not have a future as an independent business, its credit rating has now been cut to one notch above "junk".The Financial Services Authority is trying to find a buyer for the bank, in order to avoid another Northern Rock fias...

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FBI Investigation

The Times reports that the FBI is investigating a number of executives from Fannie Mae, Freddie Mac, Lehman Brothers and AIG.The Times states that are investigating as to whether the executives lied to shareholders, and whether fraud helped caused some of the troubles at these organisation.The investigation includes whether executives deliberately misled the stock market about the state of their businesses. Needless to say the politicians who oppose the $700BN Paulson bailout have latched onto this as another reason not to give money to greedy...

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The Dead Cat Bounce II

Lats week I wrote about the rebound in shares, in response to the US bailout of the financial system, being a "dead cat bounce".It would seem that I was right.Shares in London and Asia have fallen sharply, as doubts grow about whether the $700BN bailout will work. At the time of writing:-The FTSE is down 2%-The CAC down over 1%-The MSCI index of Asia-Pacific shares (excluding Japan) down 2%-The Dow down over 3%The package proposed by Henry Paulson, US Treasury Secretary, is expected to face opposition from members of Congress about how to pay for...

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No New Taxes

The Times reports that Alistair Darling has pledged that there will be no tax increases, despite the fact that Britain may have to borrow £90BN next year. The Chancellor said people were "hard pressed" and it was not time to be "taking money out of the economy". Where will the money come from th...

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The Dead Cat Bounce

Share prices are surging today on reports of a massive bailout of toxic debt by the US government, coupled with the ban by the FSA on short selling of financial stocks.At the time of writing, the FTSE is up over 7%, the DAX up by almost 4% and the CAC up by 6%.Talks are being held between the US Treasury Department and the Federal Reserve to examine proposals to move illiquid toxic assets, backed by mortgage debt into a government backed vehicle; ie they will be taken out of the balance sheets of the banks and financial institutions that created...

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Emergency Aid

The world's leading central banks, including the Bank of England, have joined forces and injected approximately £100BN into the world's financial system.The action is US funded, whereby the US Federal Reserve is lending the Bank of England, the European Central Bank (ECB), the Swiss National Bank and the central banks of Canada and Japan the money to pump into their financial systems. The question is, given that the US government allowed Lehman Brothers to go to the wall on Monday, will this restore confidence into the syst...

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The Law of The Jungle

The death of Lehman Brothers has not sated the market's appetite for fresh corpses.AIG teetered on the brink and has been bailed out, at the eleventh hour, after the US Federal Reserve agreed an $85BN bailout of the company. The deal gives the US Government a 79.9% stake, ie they nationalised it.Somewhat ironic that the world's leading advocate of free market economics resorts to old fashioned socialist policies of nationalisation, in order to save a capitalist institution.Now comes the turn of HBOS.The Times reports that Lloyds TSB is in advanced...

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Lehman Collapses

In case anyone has not heard, the Wall Street bank Lehman Brothers has filed for chapter 11 bankruptcy protection, after emergency talks to find a buyer failed.Lehman Brothers was one of Wall Street's biggest dealers in fixed interest trading, and was heavily invested in securities linked to the US sub prime mortgage market. The FTSE has fallen 3% on the news. The effect that it will have on UK banks remains to be seen, and will depend very much on their exposure to ...

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London's Reputation Tarnished

London's reputation as the world's leading financial centre was further tarnished yesterday when the London Stock Exchange suffered its worst systems failure in eight years, forcing it to suspend trading for seven hours.To add to the woes of those trying to trade yesterday the crash happened on what would have been one of the busiest days of the year, hot on the heels of the news over the weekend that Fannie Mae and Freddie Mac had been bailed out.A cynic might argue that the system was deliberately shut down, so as to avoid a massive spike in...

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Freddie and Fannie Balied Out

President Bush bailed out Freddie Mac and Fannie May yesterday, as he announced that the two mortgage lenders would be taken over by the US government.Seemingly they were weeks away from collapse.President George Bush is quoted in The Times as saying that the failure of Freddie or Fannie would have been "unacceptable". "Allowing the companies to fail or further deteriorate would damage our home mortgage market, and could weaken other credit markets that are unrelated directly to housing. Americans should be confident that the actions taken today...

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Decision Day

In less than an hour the Bank of England Monetary Policy Committee will announce their decision about interest rates.Most pundits expect them to remain unchanged. However, the decision comes against the backdrop of Darling's suicidal warning about the state of the economy over the weekend, the announcement by the OECD that we are facing recession, Brown's ineffectual economic revival package and figures released by the Halifax that show that house prices fell by 12.7% in the year to August.Given the above, one wonders quite how bad things must...

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Careless Talk Costs Cents

Alistair Darling is learning the lessons that previous Labour Chancellors have learned, namely that careless talk costs the pound dear.Sterling continued on its downward path today, falling to a 12 year low (88.2) against the Bank of England trade weighted index of currencies and to its lowest against the dollar ($1.7669) since April 2006.The fall has been attributed, not unsurprisingly, to Darling's outburst over the weekend over the state of the economy.The fact that he is now barely on speaking terms with his old "friend" Gordon Brown have given...

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Pissing In The Ocean

The government, in a rather piss pathetic attempt to reanimate the corpse of the housing market, has announced that it will exempt properties worth less than £175,000 from stamp duty (the current exemption is £125K).Given that the average house price in the UK is around £200K, this will have next to little effect.Additionally, statistics show that the number of property deals that are already exempt from stamp duty has fallen almost as much as those liable for the tax; in other words the exemption is irrelevant.The fundamental issue facing prospective...

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Self Flagellation

The FT today asserts that Chancellor Darling's bizarre self flagellation over the weekend, when he stated that the UK economy is facing times as bad as any ever seen in the last 60 years, may in fact have been a tad overdone.Quote:"The chancellor also claimed this weekend that the economic times facing Britain were arguably the worst in 60 years. His precise meaning has been in dispute but it would certainly be nonsense to suggest the UK faces the worst downturn in six decades. It is true that in specific areas – trust among financial institutions,...

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