Tag Archive for 'Capital Markets'

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Inside Wall Street’s 36 Hours of Alarm

Published on October 2, 2008 in International Finance. 0 Comments Tags: , , .

“If we don’t do this, we may not have an economy on Monday.”

So said Federal Reserve Chairman Ben Bernanke, according to The New York Times, in an emergency meeting on Thursday, Sept. 18 — part of a 36-hour period that The Times says included “two of the scariest days ever in financial markets.”

It was during this period when Mr. Bernanke and Treasury Secretary Henry M. Paulson Jr. decided to use the “break the glass” rescue plan they had been developing, a plan that became the $700 billion bailout proposal being hotly debated in Congress.

The NY Times article, reported by Andrew Ross Sorkin, Diana B. Henriques, Edmund L. Andrews and Joe Nocera and written by Mr. Nocera, recounts the fear that ran up and down Wall Street on these days. It was the big investors who were the most panicked, Mr. Nocera wrote.

Global Financial Crisis

Published on October 2, 2008 in International Finance. 0 Comments Tags: , , , , .

A detailed background analysis on the current situation around the financial crisis can be found here (BBC Global Financial Crisis), here (Wharton, Wall Street’s Day of Reckoning: What’s Next), and here (HBS, Financial Crisis Caution Urged). A graphical overview of the crisis can be found here.

Where now for capitalism?

Published on September 26, 2008 in International Business. 0 Comments Tags: , , , .

Stock markets are plunging and investment banks collapsing. What does this mean for the future of capitalism? Do we need more regulation or, indeed, less? Can bank mergers save the day? Leading economists, thinkers and analysts give their views at this section of the BBC webpage.

High leverage is out, (retail) deposit is back…

Published on September 22, 2008 in International Finance. 0 Comments Tags: , , , .

The last two major investment banks (Goldman Sachs and Morgan Stanley) in the US have changed their status to become bank holding companies, allowing them to take deposits from investors. The changes should enable Goldman Sachs and Morgan Stanley to raise more funds by opening commercial banks.

The move – part of a huge restructuring effort on Wall Street – will also give them access to Federal Reserve support. The US government has announced a $700bn (£382bn) package to tackle the worst financial crisis for decades.

Goldman Sachs and Morgan Stanley, the last two independent investment banks, will become bank holding companies, the Federal Reserve said Sunday night, a move that will fundamentally alter the landscape of Wall Street.

Transforming these investment giants into licensed, deposit-taking banks marked the end of an era for Wall Street. It heralds new regulations and supervision of previously lightly regulated investment banks, as well as an end to the outsize paychecks that helped shape the image of the chest-thumping Wall Street banker.

Source:
Bloomberg
BBC
NYTimes

Too big to fail…

Published on September 17, 2008 in International Finance. 1 Comment Tags: , , , .

American finance has a new, if reluctant, kingpin: the government. In a dramatic move on the evening of Tuesday September 16th the Federal Reserve agreed to provide American International Group with a loan of $85 billion (€59 billion) to help it stave off bankruptcy.

In return, either the Fed or Treasury will take effective control of the company, which until recently was an icon of private-sector capitalism. After the historic events of the past fortnight, who would bet that AIG will be the last lumbering giant to need resuscitation? Source.

On another note. Gold prices exploded Wednesday — posting the biggest one-day gain ever in dollar terms ($90.40, or 11.6 percent, to $870.90) — as fears of more credit market turmoil unnerved investors and triggered a flood of safe-haven buying. Read more.

Global Market Turmoil Continues

Published on September 16, 2008 in International Finance. 0 Comments Tags: , , , .

Once the gold standard in the insurance industry, AIG is the latest victim of the meltdown in the credit markets. The insurance business is all about risk—understanding it, minimizing it, pricing to compensate for it. But American International Group (AIG), the biggest insurance company in the world, seems to have had very little concept of the risk it held in its own businesses. If AIG goes, it is hard to think what else would be considered as too big to fail.

Barry Ritholtz, a prominent financial pundit, writes with tongue not entirely in cheek that the first lesson from the government’s bail-out of Bear Stearns in March was to “Go Big”. “Don’t just risk your company, risk the entire world of finance. Modest incompetence is insufficient—if you merely destroy your own company, you won’t get rescued. You have to threaten to bring down the entire global financial system.”

Behind the Scenes

Published on August 7, 2008 in International Finance. 0 Comments Tags: , .

Today the Economist published an article titled “Confessions of a risk manager”. Here, an insider explains why it is so hard to stop traders behaving recklessly. In addition, a detailed elaboration on the credit crunch and beyond is also given.

Credit Crunch: Who is to blame?

Published on August 5, 2008 in International Finance. 0 Comments Tags: , .

One year after it all started, who is to blame for the global credit crunch? Different people have different explanations for the parlous state of the world’s financial markets. The BBC asked various experts to tell us who they thought was responsible. Find the full report here.

Will GE Weather the Storm?

Published on July 18, 2008 in Global Strategy and International Business. 1 Comment Tags: , , , , .

General Electric LogoThe pressure to lift the share price is building. But CEO Jeff Immelt’s options are limited. After a historic first-quarter fumble (earnings miss of 7Cents below expectations) GE met targets for Q2 FY2009. But the market didn’t reward GE. The battered stock price rose just 2Cents on the day’s news, to US$27,66. Since the beginning of the year it’s down 25%, compared with a 15% drop in the S&P 500-stock index.

Now, GE’s CEO Immelt is fighting to revive faith in the sprawling US$173 billion conglomerate, even as forces are working against him. The credit crisis and GE’s April 11 earnings miss have put him under tougher scrutiny than at any time in his seven-year tenure as CEO. Investors are questioning the size and complexity of the company, and want him to move faster to shed assets.

Immelt is acutely aware of the pressure, even as he continues to build GE for the long term. He has overhauled the business portfolio, buying US$88 billion of assets in high-tech growth areas like alternative energy and bioscience while dumping more than US$55 billion of less attractive plays such as GE Plastics. With respect to the need for a better diversified income ratio. Immelt says “asset disposals and the boom in infrastructure should bring the ratio back to about 60% industrial and 40% financial by 2010″ (now half the net).

Immelt says he doesn’t plan to change his strategy—other than raising his cost—cutting targets by $1 billion to $3 billion for this year. While he may not like the economic climate, he’s confident that the shares will ultimately reward solid execution. In the meantime, he’s doing what he can to help GE thrive. “Everybody would like to see the stock price higher,” he says, “me at the front of the list.

* Slideshow: GE’s Generals (Overview of General Electric’s five legendary CEO’s over the past 50 years.)
* Slideshow: GE’s Sprawling Empire (Overview of General Electric’s (GE) business segments)

The Other Cost of the Financial Crisis

Published on July 11, 2008 in Ranting and Raving. 0 Comments Tags: , .

MarriageLondon’s hedge fund managers and stockbrokers have more than their bonuses to worry about: many are now fretting about their marriages, according to a new study.

About 80 percent of those surveyed believe that the turmoil — and lower bonus payments — will prompt more women to seek a divorce before their husbands’ wealth evaporates further.

Here you can find the complete article.