FT.com / In depth - Scramble to avoid collapse
World leaders are scrambling to finalise rescue plans for their banking systems before stock markets open on Monday, amid fears that the global financial system is on the brink of collapse....The extraordinary series of moves, which followed record market falls last week, came amid grave concern that investors would scramble for cash this week, threatening the implosion of financial institutions.
...Dominique Strauss-Kahn, International Monetary Fund managing director, said: “Intensifying solvency concerns about a number of the largest US-based and European financial institutions have pushed the global financial system to the brink of systemic meltdown.”
...Nicolas Sarkozy, French president, said last night: “We need concrete measures, we need unity, which is what we achieved today. None of our countries acting alone could end this crisis.”
"Stocks staged another wrenching turnaround on Friday afternoon, this time bouncing sharply higher as banking stocks surged, in a fitting cap to one of the most turbulent weeks in financial history"-WSJ
Heard on the Street - WSJ.com:
"Injecting capital alone isn't enough. The government also needs to force banks to recognize losses they have so far ignored, require banks to provide fuller disclosure of holdings, push banks to lend to one another again, euthanize weaker banks while helping strong banks get stronger, guarantee deposits and backstop a portion of bank credit. Above all, the government needs to tell banks that they have to take part in a systemic solution. The time for negotiation by banks is over.Yet such a draconian approach should also include market-based solutions. The strong should be encouraged to use markets to get stronger, in some cases in conjunction with government support."
FT.com / In depth - Plunge in global stocks puts pressure on G7:
"Investors warned against further falls. “Sadly it is now impossible to call the bottom of this market rout,” said Howard Wheeldon, strategist at the BGC Partners brokerage in London. “Irrational fear has gripped and it seems markets will now trash almost anything that walks. For now it is unstoppable.”"
Across the Curve � Blog Archive � More Thoughts on Treasury Market Weakness:
"Another portfolio manager made an interesting point about the manner in which large portfolios have chosen to operate recently. He suggests that many funds have moved to private equity funds from public stock. He also notes that many had retreated from individual stocks and bonds for the glitz of hedge fund returns.The problem there is that the new technique of management parks money in a place from which it is not extracted with ease, speed and dexterity. So the only stuff that is not nailed down and available for sale is Treasury and mortgage paper."In this market climate, I recommend reading this guy's (John Jansen) stuff ☛ http://acrossthecurve.com/ (keep in mind I'm a technologist and someone that has been away from "the Street" for almost 20 years....)
U.S. Weighs Backing Bank Debt - WSJ.com:
"The move to back all U.S. bank deposits, which is only in the discussion stage, would be aimed at preventing a further exodus of cash from financial institutions, including small and regional banks, some of which are buckling under the strain of nervous customers. In recent weeks, customers have pulled money out of some healthy community banks under the assumption that the government will only insure all the depositors of larger banks in the event of a failure.
To remove the ceiling on deposit insurance, multiple government agencies would first need to agree that there was a "systemic risk" to the economy, thereby invoking a rarely used legal power. Amid repeated efforts by the federal government to prop up ailing institutions, some bank regulators say the move is justified".
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"One major flaw in the global banking system, and a sign that problems extend beyond whether U.S. homeowners can pay their mortgages, is the fact that banks don't trust each other enough to loan beyond an overnight period. That means that cash isn't being circulated through the financial system and banks are relying too heavily on short-term loans, which does little to help pay off looming debts. Banks are hoarding cash, both to cover their debts and to improve their year-end books."
Across the Curve � Blog Archive � Some Closing Comments for October 09 2008:
"I have said this before and risk redundancy but more and more it seems likely that the resolution of this crisis will be an historic financial calamity. Each and every step which central banks and regulators have taken to resolve the crisis has been met with failure. In the beginning, the steps would produce some brief stability. In the last several days, the US Congress (belatedly) passed a bailout bill, the Federal Reserve has guaranteed commercial paper and in unprecedented coordination central banks around the globe slash base lending rates. Listen to the markets respond.The market scoffs as Libor rises, stocks plummet and IBM is forced to pay usurious rates to borrow. There is no stability and no hiatus from the pain. It continues unabated in spite of the best efforts of dedicated people to solve it. We are in the midst of an unfolding debacle. It is happening about us. I am not sure how or when it ends, but the end, when it arrives, will radically alter the way we live for a long time."
"The Dow has plunged nearly 15% during its losing streak so far, and is down 35% from its record finish a year ago.
Peter Cardillo, chief market economist at Avalon Partners, said the 9000 level, could prove to be an important testing ground for whether the broader crisis of confidence has run its course. If the market holds there, as Mr. Cardillo expects it might, the market could begin to build a more sustained rally. But if it breaks through that round number by a significant amount, the bloodletting could continue for days longer, at least.'It's getting to a point where it's every man for himself,' said Mr. Cardillo. 'When fear reaches that level, you're getting close to a bottom. But we're clearly not there quite yet.'"..."Psychology is not allowing what the economics textbook says should happen to actually happen," said strategist Doug Peta, of the New York portfolio-management firm J. & W. Seligman & Co."