I am seeing a quite abit of talk of the collapse of the U.S. dollar this summer. What will that do to our dollar, collapse to? What will happen to our RRSP's and retirement funds? If this is true would it be better to pull your funds to get out of debt?, or max out all credit to prepare for hard times? Anyone have thoughts on this?
Thought I would post this before it gets pulled, I find alot of articles go missing fast from yahoo news.
Stocks tumble as more bad economic news piles up By TIM PARADIS, AP Business Writer
1 minute ago
NEW YORK - Wall Street plunged Thursday, hurtling the Dow Jones industrials down to their lowest point in nearly two years as investors contended with a barrage of bad news: a surge in oil prices past $140 a barrel and warnings of trouble in the key financial, automotive and high-tech industries.
The Dow closed at its low of the day, down 358.41, or 3.03 percent, to 11,453.42 — its lowest finish since Sept. 11, 2006, while all the major indexes lost around 3 percent. The flight from stocks sent investors rushing for the safety of the Treasury market, where prices rose and yields tumbled.
The day's news included analysts' negative comments about General Motors Corp., which made clear to investors how much U.S. companies stand to be hurt from the fallout of the prolonged housing slump, the nearly year-old credit crisis and the soaring price of oil.
Meanwhile, Citigroup Inc. fell sharply after an analyst placed a "sell" rating on the stock and warned investors to expect less from the brokerage sector in an uneasy economic climate.
Disappointing outlooks from technology bellwethers Oracle Corp. and BlackBerry maker Research In Motion Ltd. further soured investors' moods and made the tech sector one of the steepest decliners.
The heap of worries that investors juggled Thursday added up to an increasingly troubled economy.
Broader stock indicators also fell sharply, but did not plumb the levels they reached in mid-March. The Standard & Poor's 500 index dropped 38.82, or 2.94 percent, to 1,283.15, and the technology-laden Nasdaq composite index slid 79.89, or 3.33 percent, to 2,321.37.
Summer 2008 Alert – July-December 2008: The world plunges into the heart of the global systemic crisis On the occasion of this 26th – Summer 2008 Special – edition of the Global Europe Anticipation Bulletin, the LEAP/E2020 team has decided to launch an alert on the July-December 2008 period. Indeed, our team is now convinced that this period will consist for the whole world in a major plunge into the heart of the phase of impact of the global systemic crisis. The upcoming six months are in fact the core of the unfolding crisis. The troubles met in the past six months were mere harbingers.
Royal Bank Scotland issues global stock and credit crash alert The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks.
Shares hit as fears grow over turmoil By Francesco Guerrera, Michael Mackenzie and Nicole Bullock in New York and Javier Blas in London
Published: June 26 2008 19:13 | Last updated: June 26 2008 21:36
http://www.ft.com/cms/s/0/7dbc2890-43a9 ... ck_check=1
It's funny so many people I talk to say "Man I cant wait for the oil prices to come down" or "What the hell is going on with the oil prices". They still think it's a supply and demand thing. When I tell them the American dollar is collapsing, which is effecting the world economy right now, and the prices will never get better, they laugh. It's amazing to see World news warning of the American dollar, yet no such talk in North American news.
Oil up $5 US to $139.64 a barrel Last Updated: Thursday, June 26, 2008 | 5:00 PM ET
CBC News The price of oil traded up more than $5 US on Thursday after Libya hinted at a production cut and the head of OPEC said prices could top $150 a barrel this year.
On the New York Mercantile Exchange, light sweet crude for August delivery rose $5.09 to settle at $139.64.
Earlier, oil hit an intraday peak of $140.39. That marked the first time the near-month contract for oil had surpassed $140. The previous near-month record high was $139.89 for the July contract, reached on June 16.
The price rise came as Canadian banks identified major changes in U.S. driving habits because of high gas prices.
Canadian Imperial Bank of Commerce economists Jeff Rubin and Benjamin Tal said in a report Thursday that there will be 10 million fewer vehicles on U.S. roads by 2012.
Some Americans will stop driving because oil will hit $200 a barrel by 2010, they said, which could drive the pump price to $7 a gallon, from the current $4.
Even at $4, Americans are shifting their car purchases, said Bank of Nova Scotia economist Carlos Gomes.
"With Americans increasingly buying small cars, this segment became the largest in the United States last month, surpassing both mid-size cars and pickup trucks," he wrote in an auto industry report.
Small cars now account for a quarter of U.S. sales, up from one-sixth last year, he said.
OPEC comments push price
Oil shot up on comments from Chakib Khelil, president of the Organization of the Petroleum Exporting Countries, who said he thinks the price for crude could rise to between $150 and $170 a barrel this summer. He said he sees prices declining after that, and doesn't think oil will hit $200.
Adding to oil's rise was a statement from Shokri Ghanem, the head of Libya's national oil company, who said the country might cut crude production. According to reports, Ghanem said he believes oil markets are well-supplied.
"[Ghanem], the nation's top oil official, declined to say when a decision would be made on whether to lower production, or give any indication of the size of the cut under consideration," said Addison Armstrong, director of market research at Tradition Energy in Stamford, Conn.
[font=Georgia]The Greater Depression is here![/font]
Store Closings: Symptoms of A Depressed Economy by Donald H. June 07, 2008 07:04 AM EDT (Updated: July 03, 2008 07:13 AM EDT)
1. Ann Taylor closing 117 stores nationwide A company spokeswoman said the company hasn't revealed which stores will be shuttered. It will let the stores that will close this fiscal year know over the next month.
2. Eddie Bauer to close more stores - Eddie Bauer has already closed 27 shops in the first quarter and plans to close up to two more outlet stores by the end of the year.
3. Cache closing stores - Women's retailer Cache announced that it is closing 20 to 23 stores this year.
4. Lane Bryant, Fashion Bug, Catherines closing 150 stores nationwide The owner of retailers Lane Bryant , Fashion Bug , Catherines Plus Sizes will close about 150 underperforming stores this year. The company hasn't provided a list of specific store closures and can't say when it will offer that info, spokeswoman Brooke Perry said today.
5. Talbots, J. Jill closing stores - About a month ago, Talbots announced that it will be shuttering all 78 of its kids and men's stores. Now the company says it will close another 22 underperforming stores.
The 22 stores will be a mix of Talbots women's and J. Jill, another chain it owns. The closures will occur this fiscal year, according to a company press release.
6. Gap Inc. closing 85 stores - In addition to its namesake chain, Gap also owns Old Navy and Banana Republic. The company said the closures - all planned for fiscal 2008 - will be weighted toward the Gap brand.
7. Foot Locker to close 140 stores - In the company press release and during its conference call with analysts today, it did not specify where the future store closures - all planned in fiscal 2008 - will be. The company could not be immediately reached for comment
8. Wickes is going out o f business - Wickes Furniture is going out of business and closing all of its stores, Wickes, a 37-year-old retailer that targets middle-income customers, filed for bankruptcy protection last month.
9. Goodbye Levitz - The furniture retailer, which is going out of business. Levitz first announced it was going out of business and closing all 76 of its stores in December. The retailer dates back to 1910 when Richard Levitz opened his first furniture store in Lebanon , PA. In the 1960s, the warehouse/showroom concept brought Levitz to the forefront of the furniture industry.
The local Levitz closures will follow the shutdown of Bombay.
10. Zales, Piercing Pagoda closing stores - The owner of Zales and Piercing Pagoda previously said it plans to close 82 stores by July 31. Today, it announc ed that it is closing another 23 underperforming stores. The company said it's not providing a list of specific store closures. Of the 105 locations planned for closure, 50 are kiosks and 55 are stores.
11. Disney Store owner has the right to close 98 stores The Walt Disney Company announced it acquired about 220 Disney Stores from subsidiaries of The Children's Place Retail Stores. The exact number of stores acquired will depend on negotiations with landlords.
Those subsidiaries of Children's Place filed for bankruptcy protection in late March. Walt Disney in the news release said it has also obtained the right to close about 98 Disney Stores in the U.S. The press release didn't list those stores.
12. Home Depot store closings - ATLANTA - Nearly 7+ months after its chief executive said there were no plans to cut the number of its core retail stores, The Home Depot I nc.ann ounced Thursday that it is shuttering 15 of them amid a slumping U.S. economy and housing market. The move will affect 1,300 employees.
It is the first time the world's largest home improvement store chain has ever closed a flagship store for performance reasons. Its shares rose almost 5 percent. The Atlanta-based company said the underperforming U.S.stores being closed represent less than 1 percent of its existing stores. They will be shuttered within the next two months.
13. CompUSA clarifies details on store closings Any extended warranties purchased for products through CompUSA will be honored by a third-party provider, Assurant Solutions. Gift cards, rain checks, and rebates purchased prior to December 12 can be redeemed at any time during the final sale. For those who have a gadget currently in for service with CompUSA, the repair will be completed and the gadget will be returned to owners.
14. Macy's - 9 stores -
15. Movie Gallery - 160 stores as part of reorganization plan to exit bankruptcyThe video rental company plans to close 400 of 3,500 Movie Gallery and Hollywood Video stores in addition to the 520 locations the video rental chain closed last fall.
16. Pep Boys - 33 stores
17. Sprint Nextel - 125 retail locations New Sprint Nextel CEO Dan Hesse appears to have inherited a company bleeding subscribers by the thousands, and will now officially be dropping the ax on 4,000 employees and 125 retail locations. Amid the loss of 639,000 postpaid customers in the fourth quarter, Sprint will be cutting a total of 6.7% of its work force (following the 5,000 layoffs last year) and 8% of company-owned brick-and-mortar stores, while remaining mute on other rumors that it will consolidate its headquarters in Kansas. Sprint Nextel shares are down $2.89, or nearly 25%, at the time of this writing.
18. J. C. Penney, Lowe's and Office Depot are scaling back
19. Ethan Allen Interiors: The company announced plans to close 12 of 300+ stores in an effort to cut costs.
20. Wilsons the Leather Experts - 158 stores
21. Pacific Sunwear will close its 154 Demo stores after a review of strategic alternatives for the urban-apparel brand. Seventy-four underperforming Demo stores closed last May.
22. Sharper Image: The company recently filed for bankruptcy protection and announced that 90 of its 184 stores are closing. The retailer will still operate 94 stores to pay off debts, but 90 of these stores have performed poorly and also may close.
23. Bombay Company: The company unveiled plans to close all 384 U.S.-based Bombay Company stores. The company's online storefront has discontinued operations.
24. { I have been contacted by KB Toyus. They ahve informed me that this totally untrue information as it regards their company. My source for this article was one of some 20+ international newspapers from Europe. i do not remember which one it was. I apologize to KB Toys for the erroneous information. }
25. Dillard's to Close More Stores Dillard's Inc. said it will continue to focus on closing underperforming stores, reducing expenses and improving its merchandise in 2008. At the company's annual shareholder meeting, CEO William Dillard II said the company will close another six underperforming stores this year.
Economic crisis called worst since 70s By Daniel Trotta and Jennifer Ablan
Mon Jul 14, 2008 6:05pm EDT
WASHINGTON (Reuters) - U.S. Treasury Secretary Henry Paulson is insisting that if Fannie Mae and Freddie Mac need rescuing, the plan should not benefit shareholders of the giant mortgage finance firms, the Wall Street Journal said on Saturday.
Citing people familiar with the matter, the newspaper said a possible intervention by the Bush administration to help the government-sponsored mortgage enterprises could happen as early as Monday morning.
That is around the time Freddie Mac is due to sell $3 billion worth of short-term debt, a barometer of market appetite for its securities.
A Treasury Department spokesman called the article "thinly sourced speculation" but declined to elaborate.
Paulson indicated on Friday the administration had no plans to nationalize the congressionally chartered but privately owned companies, which finance nearly half of U.S. homes.
Shares of Fannie Mae and Freddie Mac, trading at a fraction of their value a year ago, fell sharply this week as fears mounted they would not have enough capital to make it through the worst U.S. housing crisis since the Great Depression.
Home foreclosures, falling prices, tighter credit for buyers and the overall state of the U.S. economy have become major issues in the campaign for the presidential and congressional elections in November.
Fannie Mae and Freddie Mac said on Friday their finances were sound enough to withstand the housing crisis and government officials scrambled to make statements to restore confidence in them.
The abrupt erosion of the share values of the two companies raised the specter of a government rescue operation similar to the sale in March of failing investment bank Bear Stearns.
One analyst said the crisis of confidence points to risks associated with having two large private firms play such a central role in U.S. housing markets.
"What they do is more needed than ever," said Richard Bove, an analyst with Labenburg Thalman. "Get rid of them and create new structures that will perform their functions more efficiently, with more accountability and without the distraction of the equity markets."
The Wall Street Journal said Paulson does not want to help shareholders of Fannie Mae and Freddie Mac because it would create "moral hazard" -- encouraging greater risk-taking because of an expectation of a government safety net.
Paulson took a similar stance during the Bear Stearns intervention, arguing the government's role in facilitating the firm's sale was needed to prevent broader economic carnage but that its shareholders should be hit financially.
BONDHOLDERS BENEFIT
But any intervention could benefit bondholders by strengthening perceptions of government backing of the firms.
"Equity holders would suffer greatly while the position of senior debt holders would actually be enhanced by the more explicit government support," JPMorgan analysts Alex Roever and Cie-Jai Brown wrote in a note to clients.
The New York Times and the Wall Street Journal reported this week that the government has discussed plans to deal with the failure of either company, including a federal takeover.
Appetite for Freddie Mac's debt due to be sold on Monday could be a critical indicator of investor confidence next week.
"The deal will do OK because it's pretty clear the debt will be good," said Andrew Harding, head of taxable fixed income at Allegiant Asset Management in Cleveland. "The probability of government intervention is very, very high."
Russia, a holder of about $100 billion of U.S. agency debt, including securities of Fannie Mae and Freddie Mac, said on Saturday it had no immediate plans to reallocate.
Paulson indicated on Friday a bailout was unlikely. He said the administration's main focus was supporting the agencies "in their current form as they carry out their important mission."
Connecticut Sen. Chris Dodd, who heads the Senate Banking Committee, said on Friday the Fed was considering allowing Fannie Mae and Freddie Mac to borrow directly from the central bank.
The anxiety surrounding the health of the financial system was heightened all the more late on Friday when U.S. banking regulators swooped in to take over mortgage lender IndyMac Bancorp Inc, marking one of the largest bank failures in U.S. history and the fifth bank to close this year.
Freddie Mac said it had options to manage capital, such as cutting its dividend, and was not on the threshold of conservatorship. Fannie Mae said it had access to "ample sources of liquidity," noting it had issued more than $24 billion in debt this week.
_________________ "The day that we stop asking questions is the day that we have let the seeds of despotism grow at our front door."
Oh Canada
Post subject: Wow! Budweiser and Bud Light have been sold $52 billion...
Anheuser-Busch, the maker of Budweiser and Bud Light, has agreed to a takeover by a giant Belgian brewer, a union that creates a global beer leader and brings to an end one of the most iconic names in American business.
The board of directors of Anheuser-Busch Cos. Inc. on Sunday accepted a sweetened $52 billion takeover offer from Belgian brewer InBev SA, according to a joint press release.
The deal, which is subject to shareholders' and regulators' approval, would create the world's largest brewer and create the fourth-largest consumer product company worldwide.
"This combination will create a stronger, more competitive global company with an unrivaled worldwide brand portfolio and distribution network, with great potential for growth all over the world," Carlos Brito, CEO of InBev, said in the statement.
For InBev, the maker of Stella Artois and Beck's, the deal gives an aggressive company an iconic beer brand — Budweiser — to sell into emerging markets where it has already established a firm footprint.
InBev is the world's second-largest beer-maker behind SABMiller. Anheuser-Busch is by far the largest brewer in the U.S. with more than 48 percent of the market share.
Brito will be chief executive officer of the combined company, which will be named Anheuser-Busch-InBev. Shareholders will receive $70 a share, a $5 increase over the offer Anheuser-Busch rejected in June.
It wasn't immediately clear how long approval might take. Several Missouri politicians have expressed concerns about the merger — especially how it would affect the approximate 6,000 people employed by Anheuser-Busch in St. Louis.
InBev said it plans to use St. Louis as its North American headquarters, and that it will keep open all 12 of Anheuser-Busch's North American breweries.
InBev announced its intent to try and purchase Anheuser-Busch on June 11. The Anheuser-Busch board initially voted against the merger, calling the initial $65 per share offer too low.
That prompted much squabbling between the companies over the past few weeks. InBev filed a motion seeking the removal of all 13 Anheuser-Busch board members; Anheuser-Busch filed suit calling the InBev effort an "illegal scheme" that threatened to defraud Anheuser-Busch shareholders. Among other things, the suit noted that InBev failed to disclose it operates a brewery in Cuba.
Few products are associated with America as much as Budweiser. Its Clydesdale horses are fixtures of Super Bowl ads, and even the label is red, white and blue, with an eagle swooping through the "A."
"This agreement provides additional and certain value for Anheuser-Busch shareholders, while enhancing global market access for Budweiser, one of America's true iconic brands," August Busch IV, Anheuser-Busch president and CEO, said in the statement.
The merger, if completed, also will bring to an end a name synonymous with St. Louis. From college buildings to theme parks to offices to the stadium where the Cardinals play baseball, the Busch name is virtually everywhere in the Gateway City.
Eberhard Anheuser acquired the Bavarian brewery in 1860 and renamed it E. Anheuser & Co. His son-in-law, Adolphus Busch, joined the company in 1864 and it was eventually renamed Anheuser-Busch.
The company survived Prohibition by selling products ranging from ice cream to root beer.
In addition to opposition from politicians and civic leaders, at least two Web sites sprung up opposing the merger. SaveBudweiser.com claims to have more than 60,000 signatures from merger opponents. SaveAB.com hosted a recent anti-merger rally that drew hundreds to downtown St. Louis.
InBev has not said if layoffs will occur as a result of the merger. The company said it expects cost synergies of at least $1.5 billion a year by 2011 over three years. The deal won't benefit earnings per share until 2010, it said.
Even without the merger, Anheuser-Busch said last month it planned to cut pension and health benefits for salaried employees as part of an effort to slash $1 billion in costs by the end of 2010. The plan called for offering early retirement to 1,300 salaried workers 55 and older.
The cost-cutting effort was part of a strategy to fend off the merger. Anheuser-Busch also owns a 50 percent share in Grupo Modelo, Mexico's leading brewer, and a 27 percent share in China brewer Tsingtao.
___
Associated Press writer Jim Salter in St. Louis contributed to this report.
LONDON (Reuters) - The world may have changed on August 9 last year as the credit crunch first bit, and even some policymakers are beginning to question whether the way they work out what's happening in the economy is flawed.
The market upheavals which started a year ago have now spread to the wider economy. They are threatening to throw the industrialized world into recession but soaring fuel and food prices are pushing up inflation, preventing central banks from offering more succor.
Central bank forecasts this year have consistently been getting it wrong, underestimating how fast inflation would rise or how quickly economic growth would slow.
Many commentators and even some policymakers are now worried that central banks could be making the wrong decisions about interest rates because the tools they use for forecasting don't pay enough attention to the real world.
"I am very struck by the value placed on little models that are never actually confronted with data from the real world," said one G7 central banker. "This is not science in my view."
One argument is that models can be useless at economic turning points, the central banker told Reuters.
Instead of recognizing the economy is moving from growth into recession, the models can assume that everything is in balance. Many are linear and therefore may not account for a difference in the way in which economies act at different stages of the business cycle.
Models could also be misleading policymakers because some do not take account of the effect of changes in prices when a trigger point is reached. For example, the model could fail to highlight a step change in output growth that could occur if oil prices moved past a particular level.
UNHAPPY BIRTHDAY
It is commonly held that the global credit crunch started on August 9 last year. However, its cause can be taken back to exceptionally low interest rates after the September 11 2001 attacks on the United States, which prompted investors to look almost anywhere for greater profits.
Banks started making home loans to Americans who could not previously get credit, and packaged up this "sub-prime" debt into complex financial instruments which few people understood.
When U.S. property prices collapsed and defaults rose, financial institutions around the world found themselves holding billions of dollars' worth of toxic debt. They stopped lending to each other and the credit crunch began.
Since then it has claimed U.S. investment bank Bear Stearns, British mortgage lender Northern Rock and thousands of jobs in the financial industry.
Many economists are warning of possible recession which will help to tame inflationary pressures. But many policymakers seem to be more worried about their inflation-fighting credentials.
The European Central Bank raised interest rates last month. The U.S. Federal Reserve and the Bank of England have been thinking about doing so.
The guardians of price stability feel they have no choice. Fighting inflation is their primary focus, and in the case of the euro zone and British central banks their explicit mandate.
Their models assume people like price stability so they can make the right decisions with their money,
But people are not always so rational and can often talk themselves into recessionary behavior. Central banks put a lot of faith in inflation expectations but there is little consensus on a good way to measure these or how they are formed.
The ECB already appears to be back-pedaling a month after its rate rise, and President Jean-Claude Trichet said on Thursday that euro zone economic growth would be substantially weaker in the second half of the year.
The ECB had only partially anticipated the slowdown. Trichet, like many of his colleagues around the world, is worried that high inflation rates will cause so-called second-round effects -- when workers seek bigger wage increases and companies try to raise prices, leading to an inflationary spiral.
Dovish policymakers, however, argue that it is nonsense to expect big pay rises when unemployment is likely to climb.
While economic models might argue for higher interest rates now which could be followed by cuts later, the economic and political costs of such action could be severe.
Belgian economics professor Paul De Grauwe compares policymakers' defenses with those which German forces simply skirted around to invade France in World War Two.
"There is a danger that the macroeconomic models now in use in central banks operate like a Maginot line. They have been constructed in the past as part of the war against inflation. The central banks are prepared to fight the last war," he wrote on his website.
"But are they prepared to fight the new one against financial upheavals and recession? The macroeconomic models they have today certainly do not provide them with the right tools to be successful."
_________________ "The day that we stop asking questions is the day that we have let the seeds of despotism grow at our front door."
Oh Canada
Post subject: Bank collapse ahead: The worst of the global financial crisi
Bank collapse ahead: The worst of the global financial crisis is yet to come says ex-IMF economist
by Jan Dahinten
http://www.globalresearch.ca/index.php? ... a&aid=9890 Global Research, August 20, 2008
Reuters - 2008-08-19
By SINGAPORE (Reuters) - The worst of the global financial crisis is yet to come and a large U.S. bank will fail in the next few months as the world's biggest economy hits further troubles, former IMF chief economist Kenneth Rogoff said on Tuesday.
"The U.S. is not out of the woods. I think the financial crisis is at the halfway point, perhaps. I would even go further to say 'the worst is to come'," he told a financial conference.
"We're not just going to see mid-sized banks go under in the next few months, we're going to see a whopper, we're going to see a big one, one of the big investment banks or big banks," said Rogoff, who is an economics professor at Harvard University and was the International Monetary Fund's chief economist from 2001 to 2004.
"We have to see more consolidation in the financial sector before this is over," he said, when asked for early signs of an end to the crisis.
"Probably Fannie Mae and Freddie Mac -- despite what U.S. Treasury Secretary Hank Paulson said -- these giant mortgage guarantee agencies are not going to exist in their present form in a few years."
Rogoff's comments come as investors dumped shares of the largest U.S. home funding companies Fannie Mae and Freddie Mac on Monday after a newspaper report said government officials may have no choice but to effectively nationalize the U.S. housing finance titans.
A government move to recapitalize the two companies by injecting funds could wipe out existing common stock holders, the weekend Barron's story said. Preferred shareholders and even holders of the two government-sponsored entities' $19 billion of subordinated debt would also suffer losses.
Rogoff said multi-billion dollar investments by sovereign wealth funds from Asia and the Middle East in western financial firms may not necessarily result in large profits because they had not taken into account the broader market conditions that the industry faces.
"There was this view early on in the crisis that sovereign wealth funds could save everybody. Investment banks did something stupid, they lost money in the sub-prime, they're great buys, sovereign wealth funds come in and make a lot of money by buying them.
"That view neglects the point that the financial system has become very bloated in size and needed to shrink," Rogoff told the conference in Singapore, whose wealth funds GIC and Temasek have invested billions in Merrill Lynch and Citigroup
In response to the sharp U.S. housing retrenchment and turmoil in credit markets, the U.S. Federal Reserve has reduced interest rates by a cumulative 3.25 percentage points to 2 percent since mid-September.
Rogoff said the U.S. Federal Reserve was wrong to cut interest rates as "dramatically" as it did.
"Cutting interest rates is going to lead to a lot of inflation in the next few years in the United States."
The U.S. is facing the worst financial crisis since the Depression. You would never know that from the Democrats' platform in Denver or its Republican counterpart, or from listening to Barack Obama or John McCain.
While both candidates have bemoaned the ravages of the subprime crisis, they have yet to spell out steps for tackling it, such as using taxpayer money to shore up banks and housing.
``They fail to come to grips with the biggest danger that is going to hit the next president in his first few months in office: the crisis in the capital markets,'' said David Smick, a Washington-based consultant to hedge funds and author of ``The World is Curved: Hidden Dangers to the Global Economy.''
The Democrats' platform, adopted at their Denver convention this week, labels the crisis a ``debacle'' and promises to jump-start the economy with a $50 billion stimulus package. It says nothing about helping banks or bailing out the mortgage-finance firms Fannie Mae and Freddie Mac.
The draft of the Republicans' plank, to be adopted next week at their convention in St. Paul, Minnesota, supports ``timely and carefully targeted aid to those hurt by the housing crisis'' and opposes bailouts of private financial institutions. It doesn't mention Fannie and Freddie.
Fannie, Freddie
Many Democrats shy away from tackling the credit crisis because of the party's historical support for Fannie and Freddie. The Republicans, for their part, are reluctant to draw attention to a crisis that occurred on their watch. The subprime meltdown isn't the only item missing from the parties' agendas. The list also includes the Democrats' failure to set out a strategy for countering Russia's assertiveness and the Republicans' silence on income inequality.
Senator Charles Schumer, a New York Democrat, said conventions aren't the place to discuss detailed plans for dealing with the markets.
``The conventions are aimed at the average voter,'' he said Aug. 25 in Denver. ``You don't go into Quinlan's bar and ask them what to do about the'' Securities and Exchange Commission.
Democratic lawmakers also said Congress defused the issue by passing legislation last month to help homeowners refinance their mortgages and provide a financial lifeline for Fannie and Freddie.
`Big Step'
``We feel like we've taken a big step to stabilize the situation,'' said Senator Tom Carper of Delaware, a Democrat on the Banking Committee.
The situation is reminiscent of the 1988 presidential campaign between George H. Bush and Michael Dukakis, when there was little mention of the savings and loan bailout that the Bush administration later put in place. The Federal Deposit Insurance Corp. has estimated the cost of that rescue at about $125 billion, though former Treasury Secretary Lawrence Summers said the bill would have been about $300 billion in today's dollars.
The cost of the current crisis may be larger. Banks and securities companies have recorded $504 billion in losses related to the turmoil and the International Monetary Fund forecasts the bill will eventually be double that.
``We are in the midst of the worst financial crisis since World War II,'' Stanley Fisher, governor of the Bank of Israel and a former IMF official, told central bankers in Jackson Hole, Wyoming, on Aug. 23.
Bank Failure
Harvard University professor Kenneth Rogoff, another former IMF official, predicted that a big U.S. financial institution would go bust. Neither Senator Obama of Illinois, 47, nor Senator McCain of Arizona, 71, has addressed such an eventuality, which would likely entail the use of taxpayer money.
Carly Fiorina, a top economic adviser to McCain, said the candidate views the economy as ``the most important domestic issue'' and has offered solutions to the housing crisis.
``He would not allow Fannie and Freddie to fail,'' she said in an interview yesterday on Bloomberg Television. ``He would reform them fundamentally.''
To help plug their losses, banks and brokers have raised more than $350 billion in capital from investors. That is becoming increasingly difficult, said Mohamed El-Erian, co- chief executive officer of Newport Beach, California-based Pacific Investment Management Co.
The government may have to step in to keep credit flowing to the economy, according to El-Erian, who managed the endowment of Cambridge, Massachusetts-based Harvard University until 2007.
Keeping Mum
Tom Gallagher, senior managing director at ISI Group in Washington, said it isn't surprising that Obama and McCain are keeping mum about the possibility of increased government money for the banks and housing market, given the uncertain outlook and the potential costs involved.
With the government unlikely to take many further steps to ease the crisis before the November election and the end of President George W. Bush's administration, Gallagher said the next president may be compelled to act soon after taking office in January.
Gallagher, who worked as an aide to former Democratic Senator George Mitchell, likened the situation to the early 1930s. President Franklin Delano Roosevelt talked little during the campaign about the bold steps he took after the election to try to turn the economy around.
The crisis ``will confront us from day one,'' said Jason Furman, an Obama economic adviser. ``It will be an issue that will require presidential attention.''
WASHINGTON - The government is expected to take over Fannie Mae and Freddie Mac as soon as this weekend in a monumental move designed to protect the mortgage market from the failure of the two companies, which together hold or guarantee half of the nation's mortgage debt, a person briefed on the matter said Friday night.
Some of the details of the intervention, which could cost taxpayers billions, were not yet available, but are expected to include the departure of Fannie Mae CEO Daniel Mudd and Freddie Mac CEO Richard Syron, according to the source, who asked not to be named because the plan was yet to be announced.
Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson and James Lockhart, the companies' chief regulator, met Friday afternoon with the top executives from the mortgage companies and informed them of the government's plan to put the troubled companies into a conservatorship.
The news, first reported on The Wall Street Journal's Web site, came after stock markets closed. In after-hours trading Fannie Mae's shares plunged $1.54, or 22 percent, to $5.50. Freddie Mac's shares fell $1.06, or almost 21 percent, to $4.04. Common stock in the companies will be worth little to nothing after the government's actions.
The news also followed a report Friday by the Mortgage Bankers Association that more than 4 million American homeowners with a mortgage, a record 9 percent, were either behind on their payments or in foreclosure at the end of June.
That confirmed what investors saw in Fannie and Freddie's recent financial results: trouble in the mortgage market has shifted to homeowners who had solid credit but took out exotic loans with little or no proof of their income and assets.
Fannie Mae and Freddie Mac lost a combined $3.1 billion between April and June. Half of their credit losses came from these types of risky loans with ballooning monthly payments.
While both companies said they had enough resources to withstand the losses, many investors believe their financial cushions could wither away as defaults and foreclosures mount.
Many in Washington and on Wall Street hadn't expected Paulson to intervene unless the companies had trouble issuing debt to fund their operations.
This summer, Congress passed a plan to provide unlimited government loans to Fannie and Freddie and to purchase stock in the two companies if needed.
Critics say the open-ended nature of the rescue package could expose taxpayers to billions of dollars of potential losses.
Supporters, however, argue the Bush administration had little choice but to support Fannie and Freddie, which together hold or guarantee $5 trillion in mortgages — almost half the nation's total.
Representatives of Fannie and Freddie declined to comment on the government assistance plan.
Treasury spokeswoman Brookly McLaughlin said officials "have been in regular communications" with Fannie and Freddie, but refused to comment saying, "We are not going to comment on rumors."
Concern has been growing that a government rescue of Fannie and Freddie could not only wipe out common stockholders, but also be costly for scores of investment, banking and insurance companies that hold billions of dollars in their preferred shares.
Paulson has been in contact in recent weeks with foreign governments that hold billions of dollars of Fannie and Freddie debt to reassure them that the United States recognizes the importance of the two companies.
The two companies had nearly $36 billion in preferred shares outstanding as of June 30, according to filings with the Securities and Exchange Commission.
Mudd, the son of TV anchor Roger Mudd, was elevated to Fannie Mae's top post in December 2004 when chief executive Franklin Raines and chief financial officer Timothy Howard were swept out of office in an accounting scandal. Syron was named Freddie Mac's CEO in 2003, replacing former chief Gregory Parseghian, who was ousted in after being implicated in accounting irregularities.
He formerly was executive chairman of Thermo Electron Corp., a Waltham, Mass.-based maker of scientific equipment, served head of the American Stock Exchange and was president of the Federal Reserve Bank of Boston in the early 1990s.
Fannie Mae was created by the government in 1938, and was turned into a shareholder-owned company 30 years later. Freddie Mac was established in 1970 to provide competition for Fannie.
A government takeover could cost taxpayers up to $25 billion, according to the Congressional Budget Office.
But the epic decision highlights the size of the threats facing the housing market and the economy. On Friday, Nevada regulators shut down Silver State Bank, the 11th failure this year of a federally insured bank. And earlier this year, the government orchestrated the takeover of investment bank Bear Stearns by JP Morgan Chase.
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Ron Paul on the Housing Bill [youtube]http://www.youtube.com/watch?v=Wy6SlUpbnIU&feature=related[/youtube]
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