U.S. stocksrallied as growing expectations that lawmakers will salvage a $700 billion bank- rescue package helped theStandard & Poor's 500 Index recover more than half of yesterday's 8.8 percent plunge. JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp. jumped more than 13 percent as Senate leaders vowed to resume work on the bailout plan this week after its rejection spurred the S&P 500's biggest decline in two decades.Hess Corp. and Schlumberger Ltd. added more than 6 percent as optimism about the plan helped oil rebound from a $10-a-barrel drop. The S&P 500 rose 52.21 points, or 4.7 percent, to 1,158.60 at 2:34 p.m. in New York. The Dow Jones Industrial Average gained 392.90, or 3.8 percent, to 10,758.35 after tumbling a record 777.68 points yesterday. TheNasdaq Composite Index added 4.4 percent to 2,070.61. Three stocks climbed for each that fell on the Big Board. Even with the advance, the S&P 500 is poised for its worst month since 2002, with a decline of 10 percent, and is down 9.9 percent for the quarter. The cost of borrowing dollars overnight rose the most on record as banks hoarded cash after the defeat of the bailout plan by Congress. About 758 million shares changed hands on the floor of the New York Stock Exchange, 10 percent more than at the same time a week ago. European stocks rose, while Asian shares declined. Government bonds in the U.S. and Europe fell. The dollar climbed the most against the euro since the shared currency's 1999 introduction.
Light, sweet crude fell $11.39 to $95.50 on the New York Mercantile Exchange as investors feared that a worsening economy would slice into energy demand. If the decline held, it would be oil's largest ever one-day drop.
Lawmakers voted down a plan that was different than what the Bush administration had originally proposed. There were restrictions allowing Congress to limit how much of the money goes out the door at once. It also included caps on pay packages of top executives as well as assurances that the government also would ultimately be reimbursed by the companies for any losses. The Treasury would have been permitted to spend $250 billion to buy banks' risky assets, giving them a much-needed necessary cash infusion. There also would be another $100 billion for use at president's discretion and a final $350 billion if Congress signs off on it.
Wall Street found further reason for worry overseas. Three European governments agreed to inject Fortis NV with a $16.4 billion bailout. Fortis, with has headquarters in Brussels, Belgium and Utrecht, Netherlands, is Belgium's largest retail bank.
The British government, meanwhile, said it is nationalizing mortgage lender Bradford & Bingley, which has a $91 billion mortgage and loan portfolio. It was the latest sign that the credit crisis has spread beyond the U.S.
Japan's Nikkei stock average fell 1.26 percent. Britain's FTSE 100 fell 5.30 percent, Germany's DAX index fell 4.23 percent, and France's CAC-40 fell 5.04 percent.
Citigroup's acquisition will include five depository institutions and the assumption of debt. The FDIC said Citigroup will absorb up to $42 billion of losses on a $312 billion pool of loans. The FDIC said it would cover any additional losses. The FDIC gets $12 billion in preferred stock and warrants under the deal. Citi fell 44 cents, or 2.2 percent, to $19.71.
Meanwhile, consumer spending fell in August to its lowest level in six months. The Commerce Department said spending remained unchanged rather than increasing 0.2 percent as economists had expected. It was the worst showing since February.
Personal incomes rose a better-than-expected 0.5 percent after falling 0.6 percent drop in July. But after-tax incomes fell by 0.9 percent. Incomes benefited in past months from the government's stimulus checks.
The Russell 2000 index of smaller companies fell 34.77, or 4.9 percent, to 670.02.
Wall Street is also worried about overall sluggishness in the world's economy. In the U.S., for example, unemployment now sits at a five-year high of 6.1 percent. That rate is expected to increase, perhaps putting further pressure on consumer spending, which accounts for more than two-thirds of the nation's economic activity.
Fear swept across the financial markets Monday, sending the Dow Jones industrials down as much as 705 points, after the government's financial bailout package failed to survive a vote in the House.
The markets turned highly volatile as it became clear the measure wouldn't find the necessary support. The Dow regained ground then fell back again, trading down 524.88, or 4.71 percent, to 10,618.25. At its low, it was down 705.06, not far from its previous record for an intraday drop, 721.56, set during the first trading day after the Sept. 11, 2001, terror attacks. Still, in percentage terms, the decline remained well below the more than 20 percent drops seen on Black Monday of October 1987 and the Depression.
Broader stock indicators also tumbled. The Standard & Poor's 500 index declined 74.52, or 6.14 percent, to 1,138.75, and the Nasdaq composite index fell 139.00, or 6.37 percent, to 2,204.34.
With Wall Street in turmoil, the yield on the 3-month Treasury bill fell to 0.32 percent from 0.87 percent on Friday. That showed that investors were prepared to get meager returns on an investment as long as it was secure. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.69 percent from 3.84 percent late Thursday.
Investors also faced other worries about the banking system. Wachovia became the latest big bank to be rescued from its overwhelming bad mortgage debt, agreeing to a Federal Deposit Insurance Corp.-brokered buyout of its banking operations by Citigroup Inc.
Acting in the aftermath of Lehman's collapse and government rescues of American International Group Inc. and mortgage lenders Fannie Mae and Freddie Mac, President George W. Bush and congressional leaders said yesterday that they reached agreement on a rescue package aimed at reviving moribund credit markets. The U.S.'s woes have been transmitted abroad as investors focus on how much capital banks have on hand and as financial companies hoard cash for their own needs, shutting off funding for those whose access to money is limited. Fortis dropped 35 percent last week in Brussels trading on concern the company would struggle to replenish capital depleted by the 24.2 billion-euro takeover of ABN Amro Holding NV units and credit writedowns. ``Markets thought that they were over-leveraged,'' Dutch central bank governor Nout Wellink said. ``What's happening in the U.S. is having an impact on the rest of the world.'' The bailouts add to concern that Europe's patchwork of banking regulations will hinder coordinated response. While European Union officials are drafting legislation aimed at strengthening how large banks are monitored and what capital they must hold, governments have agreed only to knit supervisors closer together and pledged to cooperate in managing a crisis. Rejecting Paulson Plan Unwilling to commit taxpayer money up front, they have resisted calls to devise a plan for splitting the bill should a bailout become necessary. German Finance Minister Peer Steinbrueck and France's Christine Lagardelast week rejected a plea from U.S. Treasury Secretary Henry Paulson to follow the U.S. in erecting similar bailout mechanisms, arguing their banking systems aren't at risk of a systemic breakdown. Still, of the $554.3 billion losses and writedowns recorded by banks since the start of 2007, 42 percent are accounted for by European institutions. Daniel Gros, director of the Brussels-based Center for European Policy Studies, said in a report this month that the largest European banks have a leverage ratio -- which measures shareholders' equity to total assets -- of 35 compared with less than 20 for the biggest U.S. counterparts. ``Europe is under greater pressure to act now as it's still not ready for a major banking crisis and the worst fears of policy makers are coming true,'' said Nicolas Veron, an economist at Bruegel, a Brussels-based research organization.
European governments stepped in to rescue Fortis, Bradford & Bingley Plc, and Hypo Real Estate Holding AG as tremors from the U.S. credit crisis reverberated around the world. The U.K. Treasury seized Bradford & Bingley, Britain's biggest lender to landlords, while governments in Belgium, the Netherlands and Luxembourg threw an 11.2 billion-euro ($16.3 billion) lifeline to Fortis. Germany guaranteed a loan to Hypo. The interventions exposed how fallout from the crisis that drove Lehman Brothers Holdings Inc. into bankruptcy and prompted a $700 billion U.S. bank-rescue package has gone global. It also added urgency to negotiations among European policy makers as to how they deal with banking collapses. Shares of Dexia SA, a lender based in both Brussels and Paris, fell as much as 33 percent in Brussels trading after Le Figaro said the world's biggest lender to local governments may soon announce a plan to raise capital. Iceland agreed to buy 75 percent in Glitnir Bank hf, the island nation's third-largest bank by market value, for 600 million euros. European equities and U.S. stock-index futures fell today. Euro-area economic confidence dropped this month to the lowest since the aftermath of the Sept. 11 attacks amid concern that the U.S. plan will fail to stem the crisis. The pound tumbled by the most against the dollar in 15 years and the euro slid. The European Central Bank said today it will make additional funds available to banks through the end of the year in ``special'' auctions to ease tensions in money markets. The cost of borrowing euros for three months soared to a record 5.24 percent today. The Libor-OIS spread, a gauge of cash availability among banks, widened to a record 219 basis points. Tightening credit is casting a pall over the European economy with U.K. growth the weakest since the early 1990s and the 15-nation euro-area on the edge of its first recession. The risk is of a spiral in which the credit crisis and the economy begin to feed off each other, resulting in costlier borrowing and even weaker expansion. To head off the collapse of its biggest bank, Belgium agreed to buy 49 percent of Fortis's Belgian banking unit for 4.7 billion euros, while the Netherlands will pay 4 billion euros for a similar stake in the Dutch business, the governments said in a statement late yesterday. Luxembourg will provide a 2.5 billion-euro loan convertible into 49 percent of Fortis's banking division in that country. The talks to rescue Fortis involved European Central Bank President Jean-Claude Trichet. Former Bank of England policy maker Willem Buiter said today on his blog that the rescue of Fortis showed ``the ability of the euro-area fiscal authorities to coordinate on a bailout for a bank with not only strong cross-boundary operations, but indeed with a strong multi- national identity.'' Bradford & Bingley was saved as tighter credit made it impossible for it to operate. Deposits at the bank amounted to slightly more than half of its loans outstanding, forcing it to depend on frozen capital markets for support. Banco Santander, Spain's biggest lender, will pay 612 million pounds ($1.1 billion), including a transfer of 208 million pounds of capital, to buy its branches and deposits. Hypo Real Estate, Germany's second-biggest commercial- property lender, received a 35 billion euro loan guarantee to fend of insolvency. The rescuers of the bank will pay the guarantee cash in two allotments of 14 billion euros and 21 billion euros, a government official said, speaking on terms of anonymity. Roskilde Bank A/S, the lender bailed out by the Danish central bank because of mortgage writedowns, said today it sold its branches to Nordea Bank AB, Spar Nord Bank A/S and Arbejdernes Landsbank A/S.
The U.S. Congress raced to strike a deal on a proposed $700 billion bailout of the financial industry in an intense weekend negotiating session aimed at alleviating the worst financial crisis since the Great Depression. Pressed to act before Asian markets open on Monday, negotiators vowed to lock themselves in a room until they reach an agreement on buying distressed debt from financial institutions staggering under the weight of failed mortgages. Negotiators worked through the night and into Saturday after much of the country paused to watch Friday's first debate between the presidential candidates, Democrat Barack Obama and Republican John McCain. ew Hampshire Sen. Judd Gregg, chief negotiator for Senate Republicans, told reporters there would be a meeting with principal lawmakers later on Saturday. "The basic understanding is when we get in that room as principals, we're going to stay there until we reach an agreement or can't reach an agreement -- which hopefully won't happen," Gregg said. "We will stay until we've done something that addresses this issue in a very comprehensive and effective way." Senate Republican leader Mitch McConnell of Kentucky said "time is not our ally" and set a goal of holding a vote on a Monday. Senate Democratic leader Harry Reid pushed a deadline for an agreement of 6 p.m. (2200 GMT) on Sunday "because that's when the Asian markets open." President George W. Bush said he was confident the legislation being negotiated would be passed "very soon" and that there was "widespread agreement" on major principles. Pressure to reach a deal was intense after last week's white-knuckle ride on the financial markets in which some big, heavily indebted banks teetered, collapsed or refused to lend money to each other at low rates of interest despite massive central bank liquidity injections. Meanwhile, further signs pointed to a recession with unemployment up, orders for durable goods down, and housing starts plunging to 17-year lows. In the latest chapter in the transformation of Wall Street, regulators seized savings and loan Washington Mutual Inc on Thursday in the biggest bank failure in U.S. history, selling its assets to JPMorgan Chase & Co. FEARS OF CONTAGION Investors fretted about contagion into Europe, where Belgian-Dutch financial group Fortis NV fired its interim chief executive after liquidity concerns pushed shares down more than 20 percent to a 14-year low. IMF Managing Director Dominique Strauss-Kahn warned that the world faced a serious, long-lasting slowdown because of the crisis. At the U.S. Capitol, The lead negotiator for the House Republicans indicated they stood firmly against a Democratic plan to recoup funds that the Treasury may recover from flipping the debt or holding it until maturity and using that to fund affordable housing.
President Bush told Congress Friday it must "rise to the occasion" and pass legislation bailing out the struggling financial system, even as leading lawmakers arranged to resume difficult closed-door negotiations.
Treasury Secretary Henry Paulson, struggling to keep an emerging bipartisan accord on the plan from imploding, was set to attend the restart of talks at midday. House Republicans said they would send a top leader to the closed-door session after the House GOP earlier boycotted bargaining on an emerging bipartisan agreement, calling it unacceptable.
Bush delivered a terse statement from outside the Oval Office of the White House, acknowledging lawmakers have a right to express their doubts and work through disagreements on the $700 billion plan, but declaring they must work to avert an economic meltdown.
"There are disagreements over aspects of the rescue plan," he said, "but there is no disagreement that something substantial must be done. We are going to get a package passed."
GOP Presidential nominee John McCain, who had said he was suspending his campaign to forge a bipartisan agreement, reversed course and planned to attend the previously scheduled debate Friday night with Democratic rival Barack Obama.
Bush delivered a terse statement from outside the Oval Office of the White House, acknowledging that lawmakers have a right to express their doubts and work through disagreements, but declaring they must "rise to the occasion" and approve a plan to avert an economic meltdown.
"There are disagreements over aspects of the rescue plan," he said, "but there is no disagreement that something substantial must be done. We are going to get a package passed."
On Wall Street, the level of institutional nervousness was palpable, with stocks bouncing up and down, especially after Washington Mutual Inc. became the largest U.S. bank to fail. The Dow Jones industrial average initially fell while fears of a deepening economic crisis fed safe-haven buying in Treasury notes.
Earlier, House Financial Services Chairman Barney Frank declared that an agreement depends on House Republicans "dropping this revolt" against the Bush-requested plan.
The Massachusetts Democrat said leading Democrats on Capitol Hill were shocked by the level of divisiveness that surfaced at Thursday's extraordinary White House meeting, leaving six days of intensive efforts to agree on a bailout plan in tatters only hours after key congressional players of both parties had declared they were in accord on the outlines of a $700 billion bill.
Democrats put the responsibility on Bush for getting a rescue package back on track.
"We need to get the president to get the Republican House in order," Sen. Charles Schumer, D-N.Y., said on the Senate floor. "Without Republican cooperation, we cannot pass this bill."
Schumer said Bush should also "respectfully tell Sen. McCain to get out of town. He is not helping, he is harming. Before Sen. McCain made his announcement, we were making progress." Schumer was referring to McCain's announcement earlier in the week that he was suspending his campaign to return to Washington for the negotiations on the financial industry crisis.
McCain met briefly Friday morning with House Republican Leader John Boehner.
Bush decided to make his brief remarks Friday in hopes of projecting calm for both the markets and the talks that were to resume on Capitol Hill with key lawmakers and Paulson, said White House counselor Ed Gillespie.
Bush, whose style is usually to leave the personal lobbying to others, was on the phone repeatedly Friday with lawmakers, particularly House Republicans, and planned to do so all day. Vice President Dick Cheney, who is particularly close with the conservative wing of the party, canceled a trip to devote the day to keeping in telephone contact with the Hill from his White House office.
Among the topics of the conversations was how some elements of a rival House GOP proposal could be incorporated into the final package, Gillespie said. "There are some things that may not work and some things that may work," he said.
The White House has seen the entire process as a delicate balancing act, between understanding the enormity of what Congress is being asked to do in such a short time, respecting their role as writers of legislation and keeping pressure in a time of crisis, Gillespie said. Friday, he said, is a time "to let things settle a little bit" and not "go back up to the Hill and have all the cameras running."
Senate Majority Leader Harry Reid made it clear that winning congressional approval of any rescue package will require Congress to delay a long-sought adjournment calculated to let lawmakers have five full weeks to campaign before the election.
"It appears quite evident that we're going to be in session next week," the Nevada Democrat said, adding there might be only one Senate vote Friday -- on a second economic stimulus package featuring an extension of unemployment benefits. "There are a number of number of moving parts here, we're going to try to put them together."
One of those parts is a resolution requiring Senate passage and Bush's signature to keep federal offices open after midnight next Tuesday, when the government fiscal year expires. The House passed it Wednesday and the Senate planned to vote on it Saturday.
The White House summit meeting had been called for the purpose of sealing the deal that Bush has argued is indispensable to stabilizing frenzied markets and reassuring the nervous American public. But it quickly revealed that Bush's proposal had been suddenly sidetracked by fellow Republicans in the House, who refused to embrace a plan that appeared close to acceptance by the Senate and most House Democrats.
Paulson begged Democratic participants not to disclose how badly the meeting had gone, dropping to one knee in a teasing way to make his point according to witnesses.
And when Paulson hastily tried to revive talks in a nighttime meeting near the Senate chamber, the House's top Republican refused to send a negotiator.
"This is the president's own party," Frank said at the time. "I don't think a president has been repudiated so strongly by the congressional wing of his own party in a long time."
What caught some by surprise, either at the White House meeting or shortly before it, was the sudden momentum behind a dramatically different plan drafted by House conservatives with Boehner's blessing.
Instead of the government buying the distressed securities, the new plan would have banks, financial firms and other investors that hold such loans pay the Treasury to insure them. Rep. Paul Ryan, R-Wis., a chief sponsor, said it was clear that Bush's plan "was not going to pass the House."
But Democrats said the same was true of the conservatives' plan. It calls for tax cuts and insurance provisions the majority party will not accept, they said.
Washington Mutual Inc. was seized by government regulators and its branches and assets sold to JPMorgan Chase & Co. in the biggest U.S. bank failure in history. WaMu customers withdrew $16.7 billion since Sept. 16, leaving the Seattle-based bank ``unsound,'' the Office of Thrift Supervision said yesterday. Branches are open today and depositors have full access to their accounts,Sheila Bair, chairman of the Federal Deposit Insurance Corp., said. The failure of WaMu, which has $188 billion in deposits, ratchets up pressure on lawmakers trying to piece together a rescue package for the nation's financial system. The government's inability yesterday to reach agreement on a bailout and the seizure of the biggest savings and loan sparked a sell- off of bank stocks, led by a 25 percent tumble in Wachovia Corp. WaMu collapsed as its credit rating was slashed to junk and its stock price tumbled. Facing $19 billion of losses on soured mortgage loans, the lender put itself up for sale last week. WaMu fired CEO Kerry Killinger on Sept. 8 and replaced him with Alan Fishman, who was awarded a $7.5 million signing bonus and $1 million salary. JPMorgan became the biggest U.S. bank by deposits with the deal, acquiring WaMu's branch network for $1.9 billion. WaMu is the latest casualty of a financial crisis that drove Lehman Brothers Holdings Inc. and IndyMac Bancorp out of business and led to the hastily arranged rescues of Merrill Lynch & Co. and Bear Stearns Cos., which was also absorbed by JPMorgan. WaMu in March rejected a takeover offer from JPMorgan that the savings and loan valued at $4 a share. In most bank seizures, little or nothing is left for shareholders. WaMu, down 95 percent in the past year, dropped to 16 cents on the New York Stock Exchange. New York-based JPMorgan said today it sold $10 billion of shares at $40.50 apiece. The bank rose 33 cents, or 0.8 percent, to $43.79 in composite trading at 10 a.m. JPMorgan won't acquire WaMu's liabilities, including claims by shareholders and subordinated and senior debt holders, the FDIC said. JPMorgan paid $10 a share for Bear Stearns in March as the New York-based securities firm teetered on the brink of bankruptcy.
Federal Reserve Chairman Ben S. Bernanke said the U.S. economy will shrink if markets don't begin functioning normally, joining Treasury Secretary Henry Paulson in urging skeptical lawmakers to quickly pass a $700 billion rescue for financial institutions. ``I believe if the credit markets are not functioning, that jobs will be lost, the unemployment rate will rise, more houses will be foreclosed upon, GDP will contract, that the economy will just not be able to recover,'' Bernanke told the Senate Banking Committee today. ``My interest is solely for the strength and recovery of the U.S. economy.'' Lawmakers have balked at rubber-stamping the Treasury plan to remove illiquid assets from the banking system, with Democrats demanding it support homeowners and limit executive pay, and Republicans resisting the plan's reach and size. Bernanke, putting aside his prepared remarks released earlier today, said the Treasury should buy illiquid assets at ``hold-to-maturity'' values rather than at discounted ``fire- sale'' prices. The suspension of ``mark-to-market'' accounting for assets, a change backed by ``many banks,'' would instead hurt investor confidence. The comments are the first indication by both Bernanke and Paulson about the price Treasury is willing to pay financial institutions for toxic assets. The Fed and Treasury chiefs are trying to sway lawmakers such as SenatorSherrod Brown, a Democrat from Ohio, who said his constituents hold a ``universally negative'' opinion toward the proposal. Senator Jim Bunning, a Kentucky Republican, said the plan would ``take Wall Street's pain and spread it to the taxpayers.' sos-:bloomberg
Microsoft Corp has cut the selling price in China of one of its software products by over 70 percent to counter rampant piracy. It is the first special offer since Microsoft entered the Chinese market in 1992, the company said. Microsoft said it had slashed the price for Office 2007 Home and Student Edition to 199 yuan ($29) from 699 yuan ($102). The promotion, which started on Monday, will last through next week's National Week holiday. The price cut is designed to make Microsoft's products in China more affordable and more promotions are likely in future, said Jim Lin, the company's public relations manager in Beijing. "With this price, we believe more customers can enjoy authorised software products," he said. Violation of intellectual property rights has been a running sore in China's relations with its trading partners, including the United States. U.S. movie, music, software and book industry groups alone estimate they lost $3.5 billion in China due to piracy last year, three times more than in 2001. Microsoft, the world's largest software firm, is among the hardest-hit victims. Pirated versions of Microsoft's Office software can sell in China for less than 10 yuan ($1.50). Last month police detained the operator of a website, "Tomato Garden", from which millions of pirated versions of Microsoft software had been downloaded, according to media reports.
Today market is flat because of global sell off.If you want to trading for a week than purchase bluchip shares when sensex go 200 to 300 low.
Reliance Industries will start pumping natural gas from its deep-sea block early next year, putting India's most valuable firm on track to earn a quarter of its profit from oil and gas production, Chairman Mukesh Ambani said.
Ambani said this would amount to about 40 percent of the current indigenous production in the energy-starved country, which imports 70 percent of the oil it consumes.
"Its impact on the fortunes of India and Reliance will be enormous, contributing to foreign exchange and import bill saving of $20 billion," Ambani said.
He said the company would start pumping natural gas from the KG Basin in the January-March quarter, which is within the broad target of the company but later than the government's forecast that production would begin by November.
The company is expected to initially pump 15 million metric standard cubic metres a day (mmscmd) of gas and ramp it up to 40 mmscmd in a few months and double that output in the next phase of the field's development.
The supply of Reliance's gas is expected to encourage power plants, factories and motorists to abandon liquid fuels, and hit the growth in domestic oil sales, which grew about 7 percent in 2007/08.
Ambani said Reliance's gas supplies would be enough to power 5 million cars, 10 million trucks and over 50 million scooters and motorcycles.
It would also boost power generation by thousands of megawatts in a few months, providing enough electricity to light up 80 million homes,
Reliance owns 90 percent of the D-6 block, while Canada's Niko Resources has the rest but Reliance would consider bringing another partner on board if it helps the firm.
"It is purely driven by value proposition. If somebody gives us share in an equally prolific field in other parts of the world where we want to be ... it can't be ruled out," the firm's head of petroleum business, P.M.S. Prasad told a news conference.
But the firm had no immediate plan to sign up a foreign partner, he said.
Prasad said the company's oilfield had started pumping 5,000 barrels per day of crude oil, for which two state-run Indian refiners -- Hindustan Petroleum Corp and Chennai Petroleum Corp -- were potential customers.
The firm would begin selling crude oil with spot sales, while term contracts would be signed later, he said.
"When we bring 40,000 bpd, and the quality stabilises, that is the time we starts thinking about term contracts," he said.
Ambani said crude oil production was only the beginning of the firm's oil and gas output.
"It marks the first production from just one field that is part of a larger discovery domain. We can now confidently look forward to production from a series of other fields," he said.
Reliance is also expected within weeks to begin pumping crude through the new refinery, which together with its existing 660,000 bpd plant on India's west coast, built less than a decade ago, will be world's biggest refining complex.
We have been telling u that have trust in our markets.If there is problem in U.S. markets they are big giants who have logs of money to save themselves.They are on the verge of doing it.
With economy on the brink, White House launches campaign to quickly sell $700B bailout plan
Posted by HARSH SETHIPresident Bush says the White House is ready to work with Congress to quickly enact legislation to allow the government to purchase hundreds of billions of dollars worth of bad debt and bail out a troubled financial system that's on the brink of sinking and taking the U.S. economy down with it.
Congressional aides and administration officials were working through the weekend to fill in the details of the proposal. Treasury Secretary Henry Paulson was scheduled to appear on the Sunday talk shows to begin selling the $700 billion rescue, the largest since the Great Depression, to lawmakers and the American people.
The Bush proposal that would dole out huge sums of money to Wall Street firms and bankers is a mere three pages in length and fails to specify which institutions would qualify or say what -- if anything -- taxpayers would get in return.
sos yahoo finance
The U.S. stock market posted the steepest two-dayrally since the aftermath of the 1987 crash as government efforts to bolster banks helped the Standard & Poor's 500 Index rebound from its biggest losses in seven years. Financial shares in the S&P 500 plunged 13 percent in the first three days of the week as Lehman Brothers Holdings Inc. filed for bankruptcy, Merrill Lynch & Co. sold itself and the government seized American International Group Inc., sending the market to its steepest declines since the 2001 terrorist attacks. Government plans to purge banks of bad assets and curb bets on share declines sparked a 24 percent rally in lenders and brokerages in the final two trading sessions and left stocks little changed for the week. It's been a roller coaster, and the investors would like to get off the ride if they could the Cleveland-based chief investment strategist at Key Private Bank, which oversees about $30 billion. ``Lehman may be gone, Merrill may be gone, but the government has taken a basic step to solve the crisis by being a buyer of last resort. That offers the hope we really will put this part of the crisis behind us.'' The S&P 500 rose 0.3 percent to 1,255.08, its second straight weekly advance. The Dow Jones Industrial Average lost 0.3 percent to 11,388.44. The Russell 2000 Index of small- company stocks added 4.7 percent to 753.74.
The U.S. investment bank that filed the largest bankruptcy in history, won federal court approval to sell its North American business to London-basedBarclays Plc for $1.75 billion.
U.S. Bankruptcy Judge James Peck in Manhattan overruled objections from Lehman creditors who said the sale was moving too quickly, setting the stage for Barclays, the U.K.'s third- biggest bank, to close the deal over the weekend. Peck said it was clear no other purchaser would emerge if he delayed the sale, and that the deal would help stabilize global financial markets.
``I need to approve this transaction, because it's the only available transaction,'' Peck said. ``Lehman Brothers became a victim -- in effect the only true icon -- to fall in the tsunami that has befallen the credit markets, and it saddens me.''
Barclays President Robert Diamond called it the deal of a ``lifetime'' when the bank acquired Lehman's North American investment banking arm on Sept. 17, two days after Lehman collapsed. Barclays may add other parts of the failed investment bank to help it boost equity and advisory units in Europe and Asia, Diamond told analysts at the time.
The courtroom broke into applause when the hearing closed at 12:41 a.m. New York time.
``This week, more than any other week, I have felt the awesome power of this job,'' Peck said. ``This is the most momentous bankruptcy hearing I've ever sat through -- either as a lawyer or a judge.''
Lehman attorney Harvey Miller of Weil Gotshal & Manges said a rejection of the deal would have caused a ``major shock to the financial system.'' Miller previously said there were accounts with a total value of about $138 billion dependent on the sale.
Asset Sales
Lehman is selling off pieces that weren't included in the New York-based holding company's bankruptcy filing. The Securities Investor Protection Corp. began a liquidation proceeding for the brokerage and appointed a trustee who must also approve the sale. The SIPC is an insurance fund created under federal law and financed by brokerages.
Hedge fund Harbinger Capital Partners had asked the judge to block the sale unless Lehman immediately disclosed cash transfers it made just prior to its bankruptcy, including an alleged $5 billion transfer of cash from Lehman's London office. Another two hedge funds, Bay Harbour Management LC and Amber Capital, filed papers alleging $8 billion was moved.
Regulators including the U.S. Securities and Exchange Commission and the Federal Reserve Bank of New York favored the deal. Some creditors argued the sale should have been delayed to seek a better deal for Lehman's assets amid a government plan to purge banks of bad assets and crack down on speculators who drove down shares of financial companies.
Financial markets zigzagged Thursday as investors wrestled with their fears about a banking system crippled by mounting distrust and the fallout from years of reckless lending practices. Investors shuttled between the safety of Treasury bills and gold and the bargains posed by stocks that have been pounded lower.
Investors initially appeared somewhat relieved and even did some moderate buying of stocks after the Federal Reserve and other major central banks acted in concert to inject as much as $180 billion into global money markets. The moves were an attempt to keep the credit crisis from worsening; the Fed added another $55 billion in overnight loans Thursday.
But Wall Street, which has swung sharply all week, turned lower at midday and then fluctuated widely as investors were trying determine how to proceed in what is looking to be the most troubling period for the world's financial system in most investors' memory.
U.S. stocks tumbled as bank lending seized up in the wake of the government's takeover of American International Group Inc., raising concern that more of the nation's biggest financial companies will fail.
The S&P 500 lost 27.56 points, or 2.3 percent, to 1,186.03 at 3:03 p.m. in New York, its lowest level in more than three years as nine of the 10 main industry groups declined. The Dow Jones Industrial Average decreased 198.58, or 1.8 percent, to 10,860.44. The Nasdaq Composite Index sank 70.04, or 3.2 percent, to 2,137.86, falling below its previous low for the year on March 10. Almost 10 stocks fell for each that rose on the New York Stock Exchange.
The S&P 500 pared a drop of as much as 4.2 percent as energy companies climbed on a jump in oil prices and CNBC reported that Morgan Stanley CEO John Mack told employees the company is ``strong'' and that short-sellers are responsible for the tumble in its shares.
About $2.8 trillion of market value has been erased from global stocks this week, triggered by the largest-ever bankruptcy filing by Lehman Brothers, once the fourth-largest U.S. securities firm. Russia halted stock trading for a second day and poured $44 billion into its three biggest banks in a bid to halt the worst financial crisis in a decade.
