Obama's take:

CHICAGO — Democratic presidential nominee Barack Obama said Monday the upheaval on Wall Street was "the most serious financial crisis since the Great Depression" and blamed it on policies that he said Republican rival John McCain supports.

"This country can't afford another four years of this failed philosophy," Obama said after the shock-wave announcements that financial giant Lehman Brothers was filing for Chapter 11 bankruptcy while titan Merrill Lynch was being bought by Bank of America for about $50 billion.

Obama's statement, issued as he prepared to fly to Colorado to begin a swing through contested Western states, was intended to serve two purposes: to link McCain with the unpopular presidency of George W. Bush and to express sympathy with the anxiety of most Americans who say the economy is issue No. 1 in the election.

"The challenges facing our financial system today are more evidence that too many folks in Washington and on Wall Street weren't minding the store," Obama said in a statement. "Eight years of policies that have shredded consumer protections, loosened oversight and regulation, and encouraged outsized bonuses to CEOs while ignoring middle-class Americans have brought us to the most serious financial crisis since the Great Depression."

"I certainly don't fault Sen. McCain for these problems," Obama said, "but I do fault the economic philosophy he subscribes to."

In a presidential race turning increasingly negative, Obama also drew on editorial comments from U.S. newspapers and magazines to accuse McCain of running a dishonest campaign with some of the "sleaziest ads" ever seen.

Obama's running mate, Sen. Joe Biden, said McCain was "launching a low blow a day" and went on to say the Republican candidate stands "with George Bush firmly in the corner of the wealthy and well-connected."

Obama's campaign launched a new television commercial that aggressively pushes back against charges by McCain, the GOP presidential nominee. Obama has been under increasing pressure from Democrats to strike back harder at McCain, who has taken a slight lead in national polls. Some leading Republicans faulted both presidential campaigns Sunday for the increasingly negative tone of their advertising.

 

McCain's take:

John McCain may want to refine his economic message a bit more during this potentially disastrous week for the financial sector.

On the campaign trail in Jacksonville, Florida, the Senator declared this morning that "the fundamentals of our economy are strong," despite what he described as "tremendous turmoil in our financial markets and Wall Street."

The line may seem like GOP boilerplate, save for the fact that this morning, the McCain campaign released a television ad that began: "Our economy is in crisis." Moreover, with financial and job markets in disarray, and with Lehman Brothers, the troubled investment bank, filing for bankruptcy, it may not be the wisest political message to tell voters that the fundamentals are a-okay.

"You know," said McCain, "there's been tremendous turmoil in our financial markets and Wall Street and it is — people are frightened by these events. Our economy, I think, still the fundamentals of our economy are strong. But these are very, very difficult time. And I promise you, we will never put America in this position again. We will clean up Wall Street. We will reform government."

Many conservatives and McCain supporters have argued, against the prevailing sentiment, that despite Wall Street's failings, the economy is actually on firm footing. Donald Luskin, who described himself as "an adviser to John McCain's campaign," made such an argument in Sunday's Washington Post. But despite modest growth and relatively low unemployment rates, many economists see dire signs in today's economic landscape. On Sunday, former fed chairman Alan Greenspan said the market was the worst he had ever witnessed and predicted another major bank would close soon. Meanwhile, inflation is rising, real wages are declining, and the problems in the housing market persist.

McCain acknowledged, to various degrees, these topics in his Monday morning speech.

"I promise you we will never put America in this position again," McCain said. "This is a failure. We've got take every action to build an environment of robust energy supplies, lower inflation, control health care costs, access to international markets, low taxes and reduce burden of government to allow people to move forward toward a future of prosperity."

But his proclamation that the fundamentals of it all remained positive is surely music to Democratic ears.

UPDATE: Sure enough, Obama spokesman takes aim...

Today of all days, John McCain's stubborn insistence that the 'fundamentals of the economy are strong' shows that he is disturbingly out of touch with what's going in the lives of ordinary Americans. Even as his own ads try to convince him that the economy is in crisis, apparently his 26 years in Washington have left him incapable of understanding that the policies he supports have created an historic economic crisis.

One talking head said on TV this morning that the economy needs a quick injection of liquidity and the way to achieve that was to sell these failing financial institutions to the Chinese who are awash with cash and could institute the management discipline to turn these institutions around.



I kid you not.

 phineas wrote: 

 p4jkafla wrote: 
*decides to hang out with p4 more often*

 hippiechick wrote: 
Two of the greatest investment minds ever put it this way:

Sir John Templeton, when asked how he managed to be so successful, said " I buy at the point of maximum pessimism"

and Bernard Baruch, when asked by a member of the press to share the secret of his success. He immediately replied, "Buy your straw hats in the winter time".

Its easy to follow the crowd, but the big money is made in not following them.
.

dionysius wrote:
Well ya know we live in a socalist society, right?  That wouldn't have happened if there were no regulations.

/(effects of THC)

 dionysius wrote: 
The power of language, eh?  "deregulation" "small government (unless we need them to uncluster our fuck)", "free"...    

One comment from this side of the line came from former Bank of Canada (i.e. the Feds) president David Dodge — he said this was all clear to many central banks years ago.  Oh really? Well thanks for that, Dave.

 dionysius wrote: 
It's gonna correct itself, right? Because isn't that what the free market does? Right?

Ah. The underregulated free market at work. The laissez-unfaire system.

Carry on.

Oh, I thought this thread was about my usual Monday mornings at work.  

Carry on.

 p4jkafla wrote: 
True, because when the economy bounces back, you'll get a great return...but the is for long term investing only.

For excellent investing information, go to the site of where I used to work:

http://morningstar.com

Can the Fed Help AIG? Will It?

Posted By topeditor On September 15, 2008 @ 1:15 am In Credit Crisis, Fed | 26 Comments

I have to say this:

If you've got money to invest, now is the time.

I'm serious.

NEW YORK — When Wall Street woke up Monday morning, two more of its storied firms had fallen.

Lehman Brothers, burdened by $60 billion in soured real-estate holdings, filed a Chapter 11 bankruptcy petition in U.S. Bankruptcy Court after attempts to rescue the 158-year-old firm failed. Bank of America Corp. said it is snapping up Merrill Lynch & Co. Inc. in a $50 billion all-stock transaction.

The demise of the independent Wall Street institutions came as shock waves from the 14-month-old credit crisis roiled the U.S. financial system six months after the collapse of Bear Stearns.

The world's largest insurance company, American International Group Inc., also was forced into a restructuring.

And a global consortium of banks, working with government officials in New York, announced a $70 billion pool of funds to lend to troubled financial companies.

The aim, according to participants who spoke to The Associated Press, was to prevent a worldwide panic on stock and other financial exchanges.

Ten banks _ Bank of America, Barclays, Citibank, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Merrill Lynch, Morgan Stanley and UBS _ each agreed to provide $7 billion "to help enhance liquidity and mitigate the unprecedented volatility and other challenges affecting global equity and debt markets."

The Federal Reserve also chipped in with more largesse in its emergency lending program for investment banks. The central bank announced late Sunday that it was broadening the types of collateral that financial institutions can use to obtain loans from the Fed.

Merrill Lynch, another investment bank laid low by the crisis that was triggered by rising mortgage defaults and plunging home values in the U.S., agreed to be acquired by Bank of America for 0.8595 shares of Bank of America common stock for each Merrill Lynch common share.

That values Merrill at $29 a share, a 70 percent premium over the brokerage's Friday closing price of $17.05, but well below what Merrill was worth at its peak in early 2007, when its shares traded above $98.

Charlotte, N.C.,-based Bank of America has the most deposits of any U.S. bank, while Merrill Lynch is the world's largest brokerage. A combination of the two would create a global financial giant to rival Citigroup Inc., the biggest U.S. bank in terms of assets.

Strategically, most industry analysts say it's a good fit. If the deal goes according to plan, Bank of America will be able to offer Merrill's retail brokerage services to its huge customer base. There is not a great deal of overlap between the two companies _ Bank of America does have an investment bank already, but it has never been terribly strong.

Where there is duplication, however, the combination of the two companies could result in more layoffs. Both Merrill and Bank of America have already cut thousands of investment banking jobs over the past year.

The deal would not come without risks, however. Merrill Lynch, like many of its Wall Street peers, has been struggling with tight credit markets and billions of dollars in assets tied to mortgages that have plunged in value. Merrill has reported four straight quarterly losses.

Bank of America's own finances are far from robust. As consumer credit deteriorates, the bank has seen its profits decline, and the company is still in the midst of absorbing the embattled mortgage lender Countrywide Financial, which it acquired in January.

Insurer AIG, hit hard by deterioration in the credit markets, said Sunday it is reviewing its operations and discussing possible options with outside parties to improve its business after a week when its stock dropped 45 percent amid concerns about the company's financial underpinnings.

The Wall Street Journal and The New York Times both reported early Monday on their Web sites that the American International Group is seeking an additional $40 billion in emergency funds _ possibly from the Federal Reserve _ to help it avoid a credit rating downgrade, which would make it more expensive for AIG to raise money. The insurer has already raised $20 billion in fresh capital this year.

AIG was working with New York Insurance Superintendent Eric Dinallo and a representative of the governor's office through the weekend to craft a solution that protects policyholders, according to Dinallo's spokesman David Neustadt.

"It's clear we're one step away from a financial meltdown," said Nouriel Roubini, chairman of the consulting firm RGE Monitor.

The meetings that began Friday night were a who's who of financial heavyweights: Treasury Secretary Hank Paulson, Timothy Geithner, president of the New York Fed, Securities and Exchange Commission Chairman Christopher Cox, and a host of CEOs, including Vikram Pandit of Citigroup Inc., Jamie Dimon of JPMorgan Chase & Co., John Mack of Morgan Stanley, Lloyd Blankfein of Goldman Sachs Group Inc., and Merrill Lynch & Co.'s John Thain.

For all their efforts, Lehman had to file for bankruptcy.

The end of Lehman may not stop the financial crisis that has gripped Wall Street for months, analysts said. More investment banks could disappear soon.

The independent broker-dealers "are going the way of the dodo bird," said Bert Ely, an Alexandria, Va.,-based banking consultant.

That's partly because some of the firms, particularly Merrill, made bad bets on real estate. But several analysts said that investment companies will need the deep pockets of commercial banks to survive the next few years.

On Sunday, there was also an emergency trading session being held at the International Swaps and Derivatives Association to "reduce risk associated with a potential Lehman Brothers Holdings Inc. bankruptcy." The ISDA, which arranges trades for derivatives, said it was allowing customers to make trades and unwind positions linked to Lehman.

Roubini said it's difficult to accurately gauge the health of companies like Merrill because their financial health depends on how they value complex securities. As a result, their finances aren't very transparent, he said.

That can lead to a loss of confidence in the financial markets, he said, which can overwhelm an investment bank even if it is financially healthy by some measures.

"Once you lose confidence, the fundamentals matter less," he said.

The common denominator of the financial crisis, analysts said, is the bursting of the housing bubble. Home prices have dropped on average 25 percent so far. Roubini predicted they could drop another 15 percent.

The crisis has begun to slow the broader economy as banks make fewer loans and consumers have begun cutting spending. Many economists are now forecasting that the economy could slip into recession by the end of this year and early next year.

That, in turn, could cause additional losses for commercial banks on credit cards, auto loans and student loans.

The Fed is widely expected to keep interest rates steady at 2 percent, below inflation, when it meets Tuesday. It was possible, however, that the central bank might decide in coming weeks to cut rates if such a move is seen as needed to calm turbulent financial markets.

The International Monetary Fund predicted earlier this year that total losses from the credit crisis could reach almost $1 trillion. So far, banks have only taken about $350 billion in losses.

Commercial banks are also starting to feel the pinch. Eleven have closed so far this year, including Pasadena, Calif.-based IndyMac Bank, which had $32 billion in assets and $19 billion in deposits.

Christopher Whalen, managing director of Institutional Risk Analytics, a research firm, predicts that approximately 110 banks with $850 billion in assets could close by next July. That's out of 8,400 federally insured institutions, he said, which together hold $13 trillion in assets.

Individual customers are starting to get nervous about the financial health of their banks for the first time in generations, he said. Whalen's firm analyzes the safety and soundness of banks for business clients, but began receiving inquiries from individuals in the past two months for the first time, he said.

"If we don't get ahead of this, we are going to face a run on the retail banks by election day," he said.

 

 highwindows wrote: 
A friend of my wife's works in the financial sector in NY, as does her hubby. They make BIG money. They seem like nice people. I asked him once what it was he did for a living. He said, with a smile, "Well, no one really knows hat I do."   I should have tried to get a job like that....

"Meltdown Monday", eh? I woke up this AM wondering what the chattering classes would tag this with.  That's the best they came up with? They had all weekend! 

Well that's what they're calling it this side of the pond, after the Lehman collapse
Isn't this all the result of simply mind numbing imprudence, greed & recklessness by world banks.
Insane investment "vehicles" dreamt up by kids with Math Phd's that top management just didn't understand!!