House ignores Bush, rejects $700B bailout bill
http://news.yahoo.com/s/ap/20080929/ap_on_bi_ge/financial_meltdown
By JULIE HIRSCHFELD DAVIS, Associated Press Writer
WASHINGTON – In a stunning vote that shocked the capital and worldwide markets, the House on Monday defeated a $700 billion emergency rescue for the nation’s financial system, ignoring urgent warnings from President Bush and congressional leaders of both parties that the economy could nosedive without it.
Stocks plummeted on Wall Street even before the 228-205 vote to reject the bill was officially announced on the House floor.
As a digital screen in the House chamber recorded a cascade of “no” votes against the bailout, Democratic Rep. Joe Crowley of New York shouted news of the falling Dow Jones industrials. “Six hundred points!” he yelled, jabbing his thumb downward. The decline was about 530 points shortly before the close of the trading day.
Bush and a host of leading congressional figures had implored the lawmakers to pass the legislation despite howls of protest from their constituents back home. Not enough members were willing to take the political risk just five weeks before an election.
“No” votes came from both the Democratic and Republican sides of the aisle. More than two-thirds of Republicans and 40 percent of Democrats opposed the bill.
The overriding question for congressional leaders was what to do next. Congress has been trying to adjourn so that its members can go out and campaign. “We are ready to continue to work on this,” said Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee.
“The legislation may have failed; the crisis is still with us,” said House Speaker Nancy Pelosi, D-Calif., in a news conference after the defeat.
“What happened today cannot stand,” Pelosi said. “We must move forward, and I hope that the markets will take that message.”
At the White House, Bush said, “I’m disappointed in the vote by the United Sates Congress on the economic recovery plan.”
The president was to meet with members of his economic team later in the day “to determine next steps,” said spokesman Tony Fratto.
Republicans blamed Pelosi’s scathing speech near the close of the debate — which attacked Bush’s economic policies and a “right-wing ideology of anything goes, no supervision, no discipline, no regulation” of financial markets — for the vote’s failure.
“We could have gotten there today had it not been for the partisan speech that the speaker gave on the floor of the House,” Minority Leader John Boehner said. Pelosi’s words, the Ohio Republican said, “poisoned our conference, caused a number of members that we thought we could get, to go south.”
Rep. Roy Blunt, R-Mo., the whip, estimated that Pelosi’s speech changed the minds of a dozen Republicans who might otherwise have supported the plan.
Frank said that was a remarkable accusation by Republicans against Republicans: “Because somebody hurt their feelings, they decided to punish the country.”
Monday’s action had been preceded by unusually aggressive White House lobbying, and Fratto said that Bush had been making calls to lawmakers until shortly before the vote.
Bush and his economic advisers, as well as congressional leaders in both parties had argued the plan was vital to insulating ordinary Americans from the effects of Wall Street’s bad bets. The version that was up for vote Monday was the product of marathon closed-door negotiations on Capitol Hill over the weekend.
“We’re all worried about losing our jobs,” Rep. Paul Ryan, R-Wis., declared in an impassioned speech in support of the bill before the vote. “Most of us say, ‘I want this thing to pass, but I want you to vote for it — not me.’ “
With their dire warnings of impending economic doom and their sweeping request for unprecedented sums of money and authority to bail out cash-starved financial firms, Bush and his economic chiefs have focused the attention of world markets on Congress, Ryan added.
“We’re in this moment, and if we fail to do the right thing, Heaven help us,” he said.
The legislation the administration promoted would have allowed the government to buy bad mortgages and other rotten assets held by troubled banks and financial institutions. Getting those debts off their books should bolster those companies’ balance sheets, making them more inclined to lend and easing one of the biggest choke points in the credit crisis. If the plan worked, the thinking went, it would help lift a major weight off the national economy that is already sputtering.
More than a repudiation of Democrats, Frank said, Republicans’ refusal to vote for the bailout was a rejection of their own president.
Citigroup to buy Wachovia banking operations
http://news.yahoo.com/s/ap/20080929/ap_on_bi_ge/wachovia_citigroup
By SARA LEPRO, AP Business Writer
NEW YORK – Citigroup agreed Monday to purchase Wachovia’s banking operations for $2.1 billion in a deal arranged by federal regulators, making the Charlotte-based bank the latest casualty of the widening global financial crisis.
The deal greatly expands Citigroup’s retail franchise — giving it a total of more than 4,300 U.S. branches and $600 billion in deposits — and secures its place among the U.S. banking industry’s Big Three, along with Bank of America Corp. and JPMorgan Chase & Co.
But it comes at a cost: Citigroup Inc. said it will slash its quarterly dividend in half to 16 cents. It also will dilute existing shareholders by selling $10 billion in common stock to shore up its capital position.
In addition to assuming $53 billion worth of debt, Citigroup will absorb up to $42 billion of losses from Wachovia’s $312 billion loan portfolio, with the Federal Deposit Insurance Corp. agreeing to cover any remaining losses. Citigroup also will issue $12 billion in preferred stock and warrants to the FDIC.
The remainder of Wachovia will include its asset management, retail brokerage and certain select parts of its wealth management businesses, including the Evergreen and Wachovia Securities franchises. It will continue to be a public company under the Wachovia name.
The agreement comes after a fevered weekend courtship in which Citigroup and Wells Fargo & Co. both were reportedly studying the books of Wachovia Corp., which was weighed down by losses linked to its ill-timed 2006 acquisition of mortgage lender Golden West Financial Corp.
Wachovia, like Washington Mutual Inc., which was seized by the federal government last week, was a big originator of option adjustable-rate mortgages, which offered very low introductory payments and let borrowers defer some interest payments until later years. Delinquencies and defaults on these types of mortgages have skyrocketed in recent months, causing big losses for the banks.
Wachovia shares, which had slumped as the global credit crisis intensified in recent months, dropped $8.20, or 82 percent, to $1.80 as trading resumed Monday afternoon. They had traded as high as $52.25 over the past year.
The FDIC asserted Monday that Wachovia did not fail, and that all depositors are protected and there will be no immediate cost to the Deposit Insurance Fund.
Federal Reserve Chairman Ben Bernanke, in a statement Monday, said he supports the “timely actions” taken by the FDIC “which demonstrate our government’s unwavering commitment to financial and economic stability.”
Treasury Secretary Henry Paulson said in a statement that the sale of Wachovia’s banking operations to Citigroup would “mitigate potential market disruptions.” Paulson said he agreed with the FDIC and the Fed that a “failure of Wachovia would have posed a systemic risk” to the nation’s financial system.
The deal is essentially a vote of confidence in Citigroup’s capital strength, said Sandler O’Neill & Partners analyst Jeff Harte in a note to investors. “We are skeptical that the FDIC would have brokered a deal to sell Wachovia’s assets and liabilities into weak hands,” he said.
With the acquisition of the bulk of Wachovia, Citigroup has reclaimed its title as the biggest U.S. bank by total assets — $2.91 trillion. In terms of how shareholders value each company’s stock, Bank of America Corp. remains the largest U.S. bank, followed by JPMorgan Chase in second and Citigroup in third place.
Wachovia’s takeover marks a dramatic shift in the outlook for Citigroup’s future. Just a short time ago, the bank’s investors worried about the possibility of its own collapse given its massive exposure to mortgage-backed securities. New York-based Citigroup has not turned a profit for three straight quarters, and lost a total of $17.4 billion during that period after writing down its assets by about $46 billion. That’s the largest reduction in asset values taken by any U.S. bank in the current credit crisis.
Citigroup said it expects to reduce expenses by more than $3 billion annually as it consolidates certain functions. But with few overlaps in their regional operations, Citi projects closing fewer than 5 percent of the banks’ combined branches.
During a conference call with investors, Citigroup CEO Vikram Pandit said he is working with Wachovia CEO Bob Steel in setting up a transition team. “We will make sure that we execute on this with a great deal of precision and a great deal of speed,” he said.
The failure of the government’s proposed $700 billion rescue plan for financial institutions casts doubt on whether Citigroup will be able to rid itself of some of Wachovia’s bad debt. Some expected the bank to take advantage of the plan and potentially sell toxic mortgages and other assets it gained from Wachovia for a higher price than the bank actually paid for them.
But House lawmakers voted down the bailout proposal on Monday afternoon.
The transaction, which has been approved by the boards of both companies, is subject to approval by Wachovia’s shareholders and regulators and must close by Dec. 31.
The Wachovia acquisition caps a wave of unprecedented upheaval in the financial sector in the past six months that has redefined the banking industry, starting with the government-led forced sale of Bear Stearns Cos. to JPMorgan in March.
The failure of IndyMac Bancorp in July reignited investors’ fears about the stability of the financial sector, which led to the eventual takeover of struggling mortgage lenders Fannie Mae and Freddie Mac. Earlier this month, officials seized both Fannie and Freddie, temporarily putting them in a government conservatorship, replacing their chief executives and taking a financial stake in the mortgage finance companies.
After U.S. regulators made it clear that they would not bail out struggling investment bank Lehman Brothers Holdings Inc., rival Merrill Lynch & Co. arranged a hasty deal to be bought by Bank of America Corp. for $50 billion in stock.
Lehman Brothers was subsequently forced to declare bankruptcy, the largest ever in the United States. Investor concerns quickly turned to American International Group Inc., the nation’s largest insurer. Staving off a failure that could have sent shock waves throughout the global markets, the federal government injected an $85 billion emergency loan into the insurer.
Just days later, the government seized Seattle-based Washington Mutual, marking the largest bank failure in U.S. history. WaMu’s deposits and assets were acquired by JPMorgan for just $1.9 billion.
These events have now culminated in extraordinary moves by the federal government to try to fix the financial crisis that began more than a year ago.
Wachovia’s problems stem largely from its acquisition of Golden West Financial in 2006 for roughly $25 billion at the height of the nation’s housing boom. With that purchase, Wachovia inherited a deteriorating $122 billion portfolio of Pick-A-Payment loans, Golden West’s specialty, which let borrowers skip some payments.
This summer, Wachovia reported a $9.11 billion loss for the second quarter, announced plans to cut 11,350 jobs — mostly in its mortgage business — and slashed its dividend. Wachovia also boosted its provision for loan losses to $5.57 billion during the second quarter, up from $179 million in the year-ago period.
Senate sends $612 billion defense bill to Bush
http://news.yahoo.com/s/ap/20080927/ap_on_go_co/defense_bill
WASHINGTON – Troops would get a pay raise in a defense bill that Congress sent President Bush on Saturday. Even before passage, lawmakers had backed away from an election-season showdown with the administration over Iraq.
Legislation approved by a voice vote in the Senate would increase pay by 3.9 percent, extend bonuses and provide money for family housing, tuition assistance and other programs.
The bill, which maps $612 billion in defense spending next year, shows how lawmakers would rather go home and campaign than wage a prolonged battle in Washington with Bush over Iraq policy.
In the end, House-Senate bargainers dropped several provisions he opposed. Eliminated was language barring private interrogators from U.S. military detention facilities and giving Congress a chance to block a security pact with Iraq.
The legislation also lacks a call for a U.S. troop withdrawal from Iraq — something Democratic presidential candidate Barack Obama long has called for and Republican nominee John McCain has opposed.
The bill envisions nearly $70 billion for U.S. operations in Iraq and Afghanistan, and requires more information on contractors with projects in Iraq. It also paves the way for Bush’s plan to build an anti-missile system in Eastern Europe, a proposal strongly opposed by Russia.
The House approved the bill overwhelmingly on Wednesday. Bush is expected to sign the measure.
The measure is S. 3001 as amended.
Side note from the administrator of this blog: This is important. When I initially read glanced the headline of this story, I thought that they were talking about the bailout plan by the government to save all of these financial institutions and prevent the US from slipping into an even deeper recession. Here I was thinking that Congress had reached a conclusion about what to do concerning our economy. Sadly I was mistaken. The only reason I caught this mistake is that the bailout plan was said to have cost $700 billion, and this one said $612 billion. It disappoints me that the war in Iraq took precedence over our economy. Don’t get me wrong. I think that this bill is of utmost importance, but I think that considering the recent crisises on Wall St, we should have addressed the bailout plan first. Additionally, as mentioned by the article, there is no mention of a plan for withdrawal of troops. It just seems like the media could have mentioned it, but maybe it was planned this way. Maybe Congress waited until the weekend of the the presidential debate to pass this bill so no one would notice. Well I did, and I want you to notice it too.
Upheaval on Wall St. Stirs Anger in the U.N.
By Neil MacFarquhar
New York Times
September 24, 2008
http://www.nytimes.com/2008/09/24/world/24nations.html
UNITED NATIONS — Wall Street and the Bush administration’s record of financial oversight came under attack at the United Nations on Tuesday, with one world leader after another saying that market turmoil in the United States threatened the global economy.
“We must not allow the burden of the boundless greed of a few to be shouldered by all,” said President Luiz Inácio Lula da Silva of Brazil in an opening speech that reflected the tone of the gathering.
The annual opening of the General Assembly habitually casts a shadow over New York every September, snarling traffic and tempers. But this year it is New York, or at least Wall Street, projecting its shadow back across the United Nations. Virtually every president or monarch from around the globe made some reference to the financial upheaval, and the looming cloud was also the buzz of the back corridors.
With a pillar of American power — its financial leadership — so badly shaken, there was a certain satisfaction among some of the attendees that the Bush administration, which had long lectured other nations about the benefits of unfettered markets, was now rejecting its own medicine by proposing a major bailout of financial firms.
But there was also serious concern that the United States had not policed its markets carefully enough to prevent the damage to its economy and others, making it much harder to raise money for the world’s most vulnerable people.
“The global financial crisis endangers all our work,” said the secretary general, Ban Ki-moon, who used his opening remarks at the General Assembly to question the reliance on free markets. “We need a new understanding on business ethics and governance, with more compassion and less uncritical faith in the ‘magic’ of markets.”
President Bush, making his eighth and last address to the United Nations, with which he has had a troubled relationship, sought to reassure world leaders that his administration was taking “bold steps” to stanch the economic crisis in the United States, which, he said, “would have a devastating effect on other economies around the world.”
Amid a long ode to the importance of continuing the fight against terrorism, he devoted one paragraph to the rescue plan. “We’ve promoted stability in the markets by preventing the disorderly failure of major companies,” Mr. Bush said. He noted that many were watching how the United States responded because economies were “more closely connected than ever before.”
But for some leaders, the Bush bailout plan seemed hypocritical given the tough course Washington has often advised struggling nations to take.
“What you are seeing here is the letting off of some political steam,” said Mark Malloch Brown, a British cabinet minister and former senior United Nations official. “They are all remembering the very hard, unforgiving advice that they got from American financial institutions” to “deflate your economy, let your banks go to the wall,” he said. “There is a resentment at what they would see as a further evidence of double standards.”
The General Assembly has long served as a handy megaphone for American foes like Fidel Castro of Cuba or President Mahmoud Ahmadinejad of Iran — who this year delivered his standard diatribe against the evils of America and Zionism. The extraordinary nature of the outpouring on Tuesday, however, was that it came from some of America’s closest allies and trading partners — not from those the United States would label political outcasts, but from mainstream countries in Europe, Asia and Latin America.
President Nicolas Sarkozy of France described the crisis as the worst financial mess since the Depression of the 1930s and the financial system as “insane.” He called for a summit meeting in November to determine how to address the problems and to develop greater international regulations of financial markets. Many leaders echoed that latter demand.
Mr. Sarkozy also said that at a news conference he had talked with Wall Street bankers, but that they claimed not to know who was responsible for the mess. When banks and hedge funds hand out fat bonuses, they are all willing to gloat about their success, Mr. Sarkozy said, “but when there are deficits we don’t know who is responsible.”
During a brief appearance with Pakistan’s new president, Asif Ali Zarbari, Mr. Bush acknowledged that world leaders gathering in New York had questioned him about the turmoil and the administration’s response to it, “wondering whether or not the United States has the right plan to deal with this economic crisis.”
The American ambassador to the United Nations, Zalmay Khalilzad, said he was not hearing complaints about the financial crisis at his meetings, and suggested that the world leaders accepted that the United States was facing the issue. “We are very agile and we are moving very quickly to deal with it,” he said.
Mr. Malloch Brown, the British minister, also noted that if the leaders lambasting the United States from the podium consulted with their finance ministers, they would be likely to find them very happy that Washington was planning a huge bailout.
Yet doubts were being raised not just at the United Nations but farther afield, with Germany’s chancellor, Angela Merkel, among the most outspoken. She said that at last year’s meeting of the Group of 8, she had strongly urged both the United States and Britain to be more rigorous in supervising financial activities, and even offered specific proposals to be applied to banks and other institutions.
But the United States was not interested, she said. She also seemed to express a certain exasperation that the United States was now asking Europe for help, after inflicting damage on the rest of the world that could have been avoided.
“We did what we were supposed to do,” she said in an interview with Münchner Merkur, a German newspaper. “We adopted a decent E.U. regulation on the national statute books,” but “when it came to it, the Americans said, ‘That’s not for us.’ ”
The theme promoted for this year’s General Assembly is the development of the world’s poorest nations, laid out in eight targets, including universal primary education and the elimination of maternal mortality, known collectively as the Millennium Development Goals.
Mr. Ban had been hoping that member states would renew their commitment to the tune of $72 billion annually, and evidently the turmoil in the markets threw that into question. He told a meeting of business executives on the side of the General Assembly that if the United States could promise $700 billion for Wall Street in one week, then $72 billion should not be such a stretch.
There was a certain amount of shellshock left from the wave of bad financial news, but African leaders in particular were holding out the importance of continuing aid.
“You cannot but talk about it,” said Elizabeth Ohene, Ghana’s minister of state for education, science and sport, trying to remain optimistic that the huge bailout plan for Wall Street meant there would be plenty of money to go around.
It would be far better to invest in the education of children, she told a luncheon gathering, than to use a bunch of fancy financial engineering to bail out Wall Street and other global financial centers. “Believe me,” she said, “it will be much cheaper.”
Attack on the U.S. Embassy in Yemen
http://news.yahoo.com/s/ap/us_yemen_embassy
Washington – The State Department has confirmed that a young American woman and her Yemeni husband were killed in a terrorist attack at the U.S. Embassy in Yemen. A spokesman says officials have verified reports from the family of Susan Elbaneh that the 18-year-old from Lackawanna, N.Y., was among the victims of Wednesday’s attack. Elbaneh, who was recently wed in Yemen in an arranged marriage, was outside the embassy with her husband apparently waiting to complete paperwork, according to her brother.
The attack killed 16 people, including six militants, and was the deadliest direct assault on a U.S. Embassy in a decade. The attackers failed to breach the compound’s walls, and none of those killed or wounded were U.S. diplomats or embassy employees.
The World May or May Not Come To An End Today
So some scientists are trying to destroy Earth, and I will do my best to try to explain this to you in layman terms.
Who would do such a thing?
CERN, the European Organization for Nuclear Research, in French, it’s Conseil Européen pour la Recherche Nucléaire, which is why the acronym is CERN, instead of EONR. If you are wondering why CERN sounds so familiar, it may be because it was referenced in Dan Brown’s book Angels and Demons (a really good read I might add). CERN has the world’s largest particle collider, the Large Hadron Collider, which costs 4 billion Swiss franc, that’s equivalent to $3.8 billion in US currency (amazing, our currency is worthless even in Switzerland!) By the way, $531 million of that astronomical sum was contributed to CERN by the US. Anyway, Professor Stephen Hawking described the LHC as “absolutely safe”, telling one newspaper that the experiment is vital to the survival of humanity.
What are they trying to do? They are trying to recreate, or re-enact, what happened during the “Big Bang Theory”. You know, the theory in which scientists speculate that a colossal explosion created the beginning of the universe.
Where is this going down?
In Geneva, Switzerland.
When is this supposed to happen?
It’s actually going on as we speak. The Large Hadron Collider just passed its first major tests when it fired two beams of protons in opposite directions around a 17-mile (27-kilometer) underground ring. All of that had taken place before most of had gotten out of bed (around 8:30am).
What do they expect to learn?
Physicists around the world now have the power to smash the components of atoms together in attempts to learn about their structure. CERN hopes to recreate conditions in the laboratory a split-second after the big bang, teaching them more about “dark matter,” antimatter and possibly hidden dimensions of space and time. The LHC team also hopes to find the theoretical Higgs-Boson Particle, or the God Particle, but Professor Stephen Hawking isn’t confident that they can find it, and has bet 100 pounds they won’t.
Why do people think that this could bring about the end of the world? Some feared that the collision of protons could eventually imperil the Earth by creating micro-black holes, subatomic versions of collapsed stars whose gravity is so strong they can suck in planets and other stars.
In case you were wondering, yes there is a collider at Fermilab, which is located just outside of Chicago. It’s not as powerful as the one CERN has, but I know it’s definitely in 2nd place. Freaked out? You should be, but don’t worry, if it happens you won’t feel a thing. Earth would be destroyed in an instant (about 1/20th of a second), simply vanishing from space, and within a few minutes, the rest of the solar system would follow. Don’t panic, yet. Since the track is 17 miles long, it will be a whole month before the protons actually collide, so you have plenty of time… to agonize over our impending doom.
Anyway, If this wasn’t a sufficient enough explanation, then maybe Kate McAlpine can explain it to you better. She’s a Michigan State University graduate at CERN, who created the Large Hadron Rap, which has over a million views on YouTube.
Update on Gustav
I’m going to try something different. I am going to start each post off with a quote. Today’s quote of the day comes from current New Orleans Mayor Ray Nagin. He was asked if there was anything he would do differently in regards to Hurricane Gustav, and here is his response:
“I’d probably call Gustav, instead of the mother of all storms, maybe the mother-in-law or the ugly sister of all storms.”
Well Hurricane Gustav touched downed in the the southwest area of Louisiana today around 9:30am. It came in as a Category 2 hurricane with winds exceeding 110 mph. It quickly dropped to a Category 1 hurricane as it moved inland, and is now a tropical storm. The full extent of the damage done by Gustav is not yet known, although estimates put property damages at close to $8 billion. City officials are undoubtedly relieved that they did not have to endure weather conditions similar to those experienced during Hurricane Katrina. Those that remained to wait out Gustav numbered 80,000. It is estimated that 1 million homes are without power and the city’s sewer system is damaged, but at least they still have running water, something many had to go without when Katrina hit. Seven deaths were attributed to Gustav, all traffic related. The hurricane’s surge never reached more than 12 feet, another contrast with Katrina, whose surge reached up to 27 feet. Gustav is currently headed inland where it will reach parts of Texas & Arkansas, bringing with it up to 20 inches of rain. FEMA prepared by ensuring enough cartons of food, water, blankets and other supplies to sustain 1 million people for three days. Residents are expected to be able to return home within a week, after crews comb the city Tuesday to fully review the damage.
It’s not over yet. This is the peak of the Atlantic hurricane season. Next up we have Hanna, currently hovering over the Bahamas, with winds of up to 80 mph, classifying it as a Category 1 hurricane. It is expected to touch down Friday in Georgia and South Carolina as a Category 2 hurricane with winds of up to 100 mph. Right behind Hanna is Ike, a tropical storm that formed today and is currently headed towards the Bahamas with winds of up to 50 mph. Makes you rethink wanting to live on an island in the Caribbean for the rest of your life. Instead of images of a tropical paradise, I have images of tropical storms. I’d rather stay in Chicago, where the only thing we have to deal with are exceptionally cold winters. Bulk up and Bear down! (That was a Chicago Bears reference, by the way : )
Sources:
Gustav only sideswipes New Orleans
http://news.yahoo.com/s/ap/20080902/ap_on_re_us/gustav
by Robert Tanner and Vicki Smith, Associated Press Writers
When is hurricane season ?
http://www.aoml.noaa.gov/hrd/tcfaq/G1.html
Contributed by Neal Dorst
Gustav evacuees urged to stay away
http://www.cnn.com/2008/US/weather/09/01/gustav/
Newest Addition To Sarah Palin’s Family Is A Grandchild
Well, well, well. What do Republicans think of McCain’s running mate now? Just a few months ago, she gave birth to a baby boy, and now it is slowly becoming public knowledge that her 17 year old daughter, Bristol, is five months pregnant. Well we all know how moral and self-righteous the Republicans are. They can’t have their pick for VP with a bastard in the family. Don’t worry, though, the seventeen year old plans to marry the father of the child. The Republicans can breathe because the child won’t be born out of wedlock.
To rebut rumors, Palin says daughter, 17, pregnant
http://news.yahoo.com/s/nm/20080901/pl_nm/usa_politics_palin_dc
by Steve Holland (Reuters)
