comMITTed to Romney!

John Cronin

U.S. Drafts Sweeping Plan to Fight Crisis As Turmoil Worsens in Credit Markets September 19th, 2008 | 5 Comments | Posted in economy, wall street

In the midst of the worst credit crisis in our lifetimes, the Federal government is drafting a plan to get the bad assets off the books of lending institutions around the country in a bid to restore confidence and liquidity to the national banking system. Included in the plan is a move to provide federal insurance to money market funds which are experiencing a wave of redemptions.

~~John Cronin~~

http://online.wsj.com/article/SB122177442732653979.html

Paulson Briefs Congress on Idea to Buy Bad Assets From Banks, Insure Money-Market Funds; Stocks Rebound Sharply

By DEBORAH SOLOMON and DAMIAN PALETTA

WASHINGTON –

The federal government is working on a sweeping series of programs that would represent perhaps the biggest intervention in financial markets since the 1930s, embracing the need for a comprehensive approach to the financial crisis after a series of ad hoc rescues.

At the center of the potential plan is a mechanism that would take bad assets off the balance sheets of financial companies, said people familiar with the matter, a device that echoes similar moves taken in past financial crises. The size of the entity could reach hundreds of billions of dollars, one person said.

Another proposal would be the creation of federal insurance for investors in money-market mutual funds, coverage akin to the insurance that currently safeguards bank deposits. The move is designed to stem an outflow of funds as consumers start to worry about even the safest of investments, a sign of how the crisis is spreading to Main Street. There is $3.4 trillion in money-market funds outstanding.

In addition, the Securities and Exchange Commission is set to propose a temporary ban on short-selling. It’s not clear how broadly the ban might extend, but it could apply only to financial stocks.

Details of the plan were still being worked out Thursday night and could be delivered to Congress in “hours,” said Senate Majority Leader Harry Reid of Nevada.

The administration had been taking a patchwork approach to the financial crisis, putting out fires as they ignited. The new moves represent an effort to take a more systematic approach, after a spiral of bad debts, credit downgrades and tumbling stocks brought down venerable names from investment bank Lehman Brothers Holdings Inc. to insurance giant American International Group Inc. Banks have grown unwilling to lend to one another, a sign of extreme stress, because financial markets work only when institutions have faith in each other’s ability to meet their obligations.

Word of the plan came the same day as the Federal Reserve and other major central banks offered hundreds of billions of dollars in loans to commercial banks to alleviate a deepening freeze in the world’s credit markets. That step appeared to have moderate impact on lending among banks. Meanwhile, a wave of redemptions continued hitting money-market funds, causing a second large fund to shut to investors.

Share on Facebook

Share This

Tags: AIG, Federal Reserve, Lehman Bros., SEC, Sen. Harry Reid

John Cronin

McCain: Wall Street Woes Point To Regulation Need September 16th, 2008 | 1 Comment | Posted in AP, Barack Obama, John McCain, New York, economy, stocks, wall street

As a free market conservative, I never thought I would be among the first to raise a hue and cry for re-regulation, but that is exactly what I’m advocating. The monumental failures of former Wall St. titans Merrill Lynch and Lehman Bros., along with mortgage giants Fannie Mae and Freddie Mac, have demonstrated
beyond any reasonable doubt, that these institutions had virtually no internal controls. That being the case and considering the devastation they leave behind them when they fail, I feel that we must come to the conclusion that external controls are now necessary.

Even for those who don’t accept re-regulation with out stretched arms, considering the massive bailouts that have already been made and keeping in mind the much rumored commercial banks that may need to be rescued by the FDIC, what alternative do we have? As big as the Federal government is, it’s resources aren’t infinite. Unless someone just happens to have an extra trillion dollars just laying around, I don’t know what else we can do, but craft new legislation that will re-institute the kind of risk management that sophisticated money management firms are expected to employ on their own.

I read an article yesterday that came to the conclusion that “moral hazard” ( usually an insurance term ) has been re-introduced to the players of Wall Street. If you take big risks and the trades go south, you are on your own. The days of coming to the U.S. Treasury or lining up the limos outside the New York Fed are over.

~~John Cronin~~

By GLEN JOHNSON
Associated Press
September 15, 2008

JACKSONVILLE, Fla. (AP) – Wall Street turmoil underscores the need to overhaul “the outdated and ineffective patchwork quilt of regulatory oversight in Washington,” Republican presidential contender John McCain said Monday.

In a statement issued in advance of market openings, the Arizona senator said he agreed there should be no taxpayer-financed bailout of Lehman Brothers even as the investment banking giant faced the specter of liquidation. Meanwhile, Merrill Lynch was selling itself to Bank of America for less than half of the iconic brokerage firm’s recent value.

“It is essential for us to make sure that the U.S. remains the pre-eminent financial market of the world. This will be a highest priority of my administration. In order to do this, major reform must be made in Washington and on Wall Street,” McCain said in his statement.

He added: “The McCain-Palin administration will replace the outdated and ineffective patchwork quilt of regulatory oversight in Washington and bring transparency and accountability to Wall Street. We will rebuild confidence in our markets and restore our leadership in the financial world.”

Over the weekend, advisers both to McCain and Democratic rival Barack Obama said they did not favor a government bailout of Lehman Brothers like that previously provided to Fannie Mae and Freddie Mac. The government also help engineer the recent sale of Bear Stearns Cos. to J.P. Morgan & Co.

“I am glad to see that the Federal Reserve and the Treasury Department have said no to using taxpayer money to bailout Lehman Brothers, a position I have spoken about throughout this campaign,” said McCain. “We are carefully monitoring the financial markets, including the duress at Lehman Brothers that is the latest reminder of ineffective regulation and management. Efforts must also be focused on ensuring that the deposits of hardworking Americans are protected.”

Share on Facebook

Share This

Tags: Lehman Bros., Merril Lynch, New York Fed, Treasury Dept.