The Economic Crisis: It’s Still All About Trying To Make Things Look Good…Band Aid Work!

The dollar sinks. Economic crisis worsens. Is anyone in charge? San Francisco Chronicle

ABC's Golodryga: Another Great Depression Looming?

Fed facing vicious cycle in economy ahead of cut

Market Tumult Reframes Race March 18, 2008; Page A2

Forget those campaign ads about electing a president ready to answer the phone at 3 a.m. to deal with an international security crisis.

It increasingly appears that the premium in this presidential campaign will be on picking a president who can handle a 3 a.m. call about an international economic crisis -- for example, a meltdown of the Japanese stock market.

What They Are Saying n Finance's Front LinesMarch 18, 2008 8:32 a.m.

The Morning Brief, a look at the day's biggest news, is emailed to subscribers by 7 a.m. every business day. Sign up for the e-mail here.

With stock, commodity and currency markets stabilizing a bit today, apparently taking their cue from yesterday's trading on Wall Street, here are some of the voices of people trying to deal with the financial tsunami of Bear Stearns's weekend collapse and the marketplace uncertainty and tension that are nowhere near abating.

"Thank you, Mr. Secretary, for working over the weekend. You've shown the country and the world that the United States is on top of the situation," President Bush said to Treasury Secretary Henry Paulson, in an appearance before reporters yesterday at the White House. "You've reaffirmed the fact that our financial institutions are strong and that our capital markets are functioning efficiently and effectively."

"He has no idea what's going on. Even by his standards, he's wrong," Rep. Barney Frank, chairman of the House Financial Services Committee, tells the Los Angeles Times, adding that he had been pushing Mr. Bush to pay more attention to the economy for more than a year.

"Without the Fed acting as lender of last resort, today could have been much worse," Mickey Levy, chief economist at Bank of America, tells The Wall Street Journal, which calls the orderliness of U.S. stock trading yesterday the passage of an important test for the Federal Reserve and its unprecedented steps to keep markets calm in recent days. But the paper notes the Fed faces its next test today, when policy makers meet to decide how much to cut the benchmark federal-funds rate and the price of borrowed money for much of the U.S. economy.

"Now that large investment banks are allowed to step up to the window, some greater degree of regulation should be examined," Democratic Sen. Charles Schumer, the chairman of the Joint Economic Committee and a member of the Senate Banking Committee, told reporters yesterday, suggesting the Fed's move to lend to investment banks as it does to commercial banks means they will need stricter supervision than they currently get from the Securities and Exchange Commission, as American Banker reports. "Regulation is fractured and based on a financial system that doesn't work any longer … There should be some combination of regulators or they should at least act in greater harmony."

"It's devastating, I have a lot of good friends here, from mail clerks to senior people. I've spent more time at Bear Stearns than I have with my own family," Stephen Raphael, a 62-year-old semiretired Bear broker, tells the Journal, which notes that J.P. Morgan Chase's deal to buy Bear Stearns for $2 a share wiped out the life savings of many of Bear's 14,000 employees, who have long been encouraged to invest in their employer and owned one-third of the firm's shares. Most also expect to lose their jobs.

"Of course the pay cut won't hurt Ospel but it does send a signal to investors," Joerg de Vries-Hippen, chief investment officer for European stocks at Allianz Global Investors in Frankfurt, tells Bloomberg, following UBS's announcement that it cut Chairman Marcel Ospel's pay by 90% to $2.62 million for 2007, after Europe's largest bank by assets reported the biggest-ever loss by a bank thanks to bad bets in the U.S. subprime-mortgage market. "Bottom line is that everybody thought UBS had the smartest guys making the smartest trades. … It turns out they made some of the dumbest."

"Ninety-eight was pretty ugly for us. … This is uglier for the system -- it's more pervasive and more global," Richard Fuld, the head of Lehman Brothers, tells the New York Times, in arguing the firm's survival of the 1998 global currency crisis taught the firm lessons that is helping it deal with today's world-wide financial problems. While spooked investors were selling off shares in Lehman and other firms yesterday, Mr. Fuld says Lehman is in good shape with comfortable levels of funding. "We learned a ton in '98. … We have a much different liquidity profile today than we did then."

"Obviously the financial markets crisis which started in the United States is now more serious and even more global than it was a few weeks ago. The risks of contagion are very high," Dominique Strauss-Kahn, head of the International Monetary Fund, told a Paris news conference, where he said the IMF would again be cutting its global growth forecasts, as Reuters reports.

Bear Stearns, JPMorgan, Federal Reserve Bank of New York, Bear Raid Rocks the Markets

Following the Fed

The New York Times has the latest news on the Federal Reserve Board.

The Fed Access Link

2008 Press Releases:

Press Release Release Date: March 18, 2008

For immediate release

The Federal Open Market Committee decided today to lower its target for the federal funds rate 75 basis points to 2-1/4 percent.

Recent information indicates that the outlook for economic activity has weakened further. Growth in consumer spending has slowed and labor markets have softened. Financial markets remain under considerable stress, and the tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters.

Inflation has been elevated, and some indicators of inflation expectations have risen. The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization. Still, uncertainty about the inflation outlook has increased. It will be necessary to continue to monitor inflation developments carefully.

Today’s policy action, combined with those taken earlier, including measures to foster market liquidity, should help to promote moderate growth over time and to mitigate the risks to economic activity. However, downside risks to growth remain. The Committee will act in a timely manner as needed to promote sustainable economic growth and price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Gary H. Stern; and Kevin M. Warsh. Voting against were Richard W. Fisher and Charles I. Plosser, who preferred less aggressive action at this meeting.

In a related action, the Board of Governors unanimously approved a 75-basis-point decrease in the discount rate to 2-1/2 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, and San Francisco.

March 18, 2008

FOMC statement and Board approval of discount rate requests of the Federal Reserve Banks of Boston, New York, and San Francisco

March 17, 2008

Approval of the discount rate action of the Federal Reserve Banks of Boston, Cleveland, Richmond, Chicago, Minneapolis, Kansas City, and San Francisco

March 16, 2008

Federal Reserve announces two initiatives designed to bolster market liquidity and promote orderly market functioning

March 14, 2008

The Federal Reserve is monitoring market developments closely and will continue to provide liquidity as necessary to promote the orderly functioning of the financial system

March 11, 2008

Federal Reserve announces results of auction of $50 billion in 28-day credit held on March 10, 2008

March 11, 2008

Federal Reserve and other central banks announce specific measures designed to address liquidity pressures in funding markets

March 10, 2008

Federal Reserve will offer $50 billion in 28-day credit through its term auction facility today

March 7, 2008

Federal Reserve announces two initiatives to address heightened liquidity pressures in term funding markets

February 29, 2008

Federal Reserve will offer $30 billion in 28-day credit through its term auction facility on March 10 and March 24, 2008

February 26, 2008

Minutes of Board discount rate meetings, January 21 through January 30, 2008

February 26, 2008

Federal Reserve announces results of auction of $30 billion in 28-day credit held on February 25, 2008

February 22, 2008

Federal Reserve will offer $30 billion in 28-day credit through its term auction facility on February 25, 2008

February 20, 2008

Minutes of Federal Open Market Committee, January 9, 21, and 29-30, 2008

February 12, 2008

Federal Reserve announces results of auction of $30 billion in 28-day credit held on February 11, 2008

February 8, 2008

Federal Reserve will offer $30 billion in 28-day credit through its term auction facility on February 11, 2008

February 1, 2008

Federal Reserve will conduct two auctions of 28-day credit through its term auction facility in February

January 31, 2008

Approval of the discount rate action of the Federal Reserve Banks of Richmond, Minneapolis, and Dallas

January 30, 2008

FOMC statement and Board approval of discount rate requests of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Atlanta, Chicago, St. Louis, Kansas City, and San Francisco

January 29, 2008

Federal Reserve announces results of auction of $30 billion in 28-day credit held on January 28, 2008

January 25, 2008

Federal Reserve will offer $30 billion in 28-day credit through its term auction facility on January 28, 2008

January 24, 2008

Approval of the discount rate action of the Federal Reserve Banks of Atlanta and Kansas City

January 22, 2008

Approval of the discount rate action of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Dallas, San Francisco, and St. Louis

January 22, 2008

FOMC statement and Board approval of discount rate requests of the Federal Reserve Banks of Chicago and Minneapolis

January 15, 2008

Federal Reserve announces results of auction of $30 billion in 28-day credit held on January 14, 2008

January 11, 2008

Federal Reserve will offer $30 billion in 28-day credit through its term auction facility on January 14, 2008

January 8, 2008

Minutes of Board discount rate meetings, November 5 through December 11, 2007

January 4, 2008

Federal Reserve will conduct two auctions of 28-day credit through its term auction facility in January

January 2, 2008

Minutes of Federal Open Market Committee, December 6 and 11, 2007

www.nytimes.com

Monday, 17 March 2008 04:21:14 GMT

A Run on the Dollar? Monday, 17 March 2008 11:03:13 GMT

Forex News: Fed Discount Rate Cut,Bear Sterns Collapse Sparks Equity and Dollar Sell Off Monday, 17 March 2008 09:53:50 GMT

Bear Essentially Bankrupt, Panic Grips FX, Dollar Dumped Mercilessly - Will Central Banks Intervene? Monday, 17 March 2008 04:21:14 GMT

A Run on the Dollar? Saturday, 15 March 2008 00:18:07 GMT

Forex In 60 Seconds: Bear Stearns Bailout, Signs of Severe Credit Crunch Weigh on US Dollar, DJIA (Video)

http://media.dailyfx.com/podcasts/FXRadioPM031408.mp3

A 75bp Fed Cut Seems Guaranteed, But What About The Dollar?

ABC's Stephanopoulos: 'Economy Almost Certainly in Recession'
By Noel Sheppard
NANCY PELOSI (D-Cali.): Well, many people across our country believe that we are because of how this economy is impacting them and their homes. I don't like to use the word because I... STEPHANOPOULOS: Why not? ...
NewsBusters.org - Exposing Liberal... - http://newsbusters.org

Shhh . . . Don't Say 'Recession.'

If (as is often the case) talking about sex makes people more interested in having it, does that mean that the current talk about a recession could actually be creating one?

Well, maybe.

Does that seem rational? Of course not. But when we make one decision, even when it's about an arbitrary number, we bring this history into our future decisions, and continue to make the same decisions over and over without going back and questioning their wisdom.

This suggests that if we just ignored the talk about recession, we would repeat our past behaviors and not deviate much from our pre-recession pattern of purchasing decisions. But when everyone is talking about recession, it's likely to make us stop, rethink our past decisions and feel that something needs to change. And so we change our patterns, start acting as if we're in a recession -- and thereby create one. On the whole, it might be better if we just talked about sex instead.

Treasury Secretary Paulson Refuses Action to Strengthen Dollar

Posted by willyloman on March 17, 2008

(Over the past 8 years “real money” earnings of the average US citizen has steadily declined to pre-WWII levels, while Paulson’s “real economy”, the wealth amassed by the richest investor class Americans, has grown exponentially. In the past two months 85,000 jobs have been lost. This is Paulson’s “real economy” that he wants to prop-up at the taxpayer’s expense, at the cost of further reducing the value of the dollar, and increasing inflation even more: passing on the cost of corporate and investor-class greed to you and me at the check-out line and the gas pump.)

from The Raw Story, here.

Fox News’ Chris Wallace assails Treasury Secretary Henry Paulson on this morning’s Fox News Sundayabout the implications behind the federal bailout of troubled investment firm Bear Stearns.

“We’ve got strong financial institutions,” insists Paulson. “Our markets are the envy of the world (probably because they are unregulated and unrestricted; allowing the investor class to rake us over the coals, and then expect the tax-payers to bail them out when their unmitigated greed threatens to corrupt the entire system).

They’re resilient, they’re…innovative, they’re flexible. I think we move very quickly to address situations in this country, and, as I said, our financial institutions are strong.”

On being asked if the government will step in to bail out any additional firms, Paulson refuses to “speculate” on what “might happen,” but insists: “Our focus, our priority… No. 1 priority, is the stability of our financial systems.”(at the cost of your tax money, and higher inflation)

“What we’re working to do,” he continues, “is to minimize the impact of what’s going on in housing, what’s going on in the capital markets, on the real economy.”(the “real economy” being the 57 million dollar salaries of the CEOs who put us in this situation in the first place)

“But,” pushes Wallace, “isn’t the result of this that U.S. taxpayers might end up holding billions of dollars in bad mortgage securities?”

“I’m not going to speculate about the outcome of this specific situation,” reiterates Paulson. “You’re going to have to wait and see.(You’re going to have to wait and see? Wait and see how the average American pays for the excessive greed of the investor class? That is, if the MSM even covers the story.) Conversations are going on–over the weekend–I’m very involved in those conversations.”

“I’m confident that this was the right thing to do,” he continues. “Sometimes there are difficult decisions; this, in my judgment, was not a difficult decision. (of course not; his super wealthy buddies will be bailed out, and it won’t cost him a dime) It was a right decision. And, again, our markets are very important.”

“Why should the government,” asks Wallace, “and thereby, U.S. taxpayers, bail out lenders and borrowers who made bad decisions; and, if they know they’re going to be bailed out, what does that do to the ‘moral hazard’ argument that they don’t end up paying a price?”

Paulson insists he understands the “moral hazard” argument, and tells Wallace he is jumping to conclusions when it comes to the taxpayer cost of the Bear Stearns bailout, and to “wait and see.” Paulson further defends protecting the “capital markets,” and thereby, he says, the economy.

“Why not,” asks Wallace of the plunging U.S. dollar, “take a more aggressive stance and support a stronger and stable dollar, and even implement policies to–prop up the dollar?”

“A strong dollar is in our nation’s interest,” responds Paulson. “Our long-term fundamentals in this country–economic fundamentals–are strong. Our economy has its ups and downs like any other economy, but I believe that that long-term strength is going to be in the dollar.”

Paulson touts “pro-growth tax” (meaning less taxes for the wealthy and the corporations) and openness to free trade (including a pending free trade agreement with Colombia).

He concludes: “Anything we can do to enhance confidence in our marketplace; in our capital markets; in our economy; are–the policies that increase confidence in our economy over time.”

More of the interview appears below, as broadcast on Fox News’ Fox News Sunday on March 16, 2008.