And from Bloomberg…another day, another bailout

Latest Economic Astrology News Here

Dear Friend and Reader:

While I’m preparing some astrology associated with the latest economic events, I wanted to at least post the basic news of what is developing. The stories below are from Bloomberg. I’ll be back in about half an hour with some clues from the astrological signature. There was a very significant signpost on May 5, one that directly resonated with the warning we had on June 21, 2001 that something was coming a little later in that year.

Eric Francis
AIG headquarters, the world’s largest insurance company that was purchased by the United States government.

I’ve also been working through some of my contacts on Wall Street and in the financial sector and I can tell you this: they all feel we are in uncharted waters.

Consider below that in the land of “competition” and “free enterprise,” the federal government has purchased the world’s largest insurance company, American International Group. Just meditate on that for a moment…if you read The New York Times today you’ll see that they did this to prevent the potential collapse of the global economy, since so many other companies are invested in AIG. This is not just an American problem. “The system” is everywhere.

— Eric Francis

AIG Gets $85 Billion Fed Loan, Cedes Control to Avoid Collapse

By Hugh Son, Erik Holm and Craig Torres

Sept. 17 (Bloomberg) — American International Group Inc. averted the worst financial collapse in history by accepting an $85 billion federal loan and giving the government a majority stake.

The U.S. reversed its opposition to a bailout of AIG, the nation’s biggest insurer by assets, after private efforts failed and the Federal Reserve concluded that “a disorderly failure of AIG could add to already significant levels of financial market fragility,” according to a Fed statement late yesterday.

“It’s an enormous relief,” said David Havens, credit analyst for UBS AG in Stamford, Connecticut. “Nobody really knows what it would have meant if they would have been allowed to fail, but there was an enormous amount of systemic risk. The problem was, nobody really knew how bad it could have been.”

AIG gives up a 79.9 percent stake to the government and senior managers including Chief Executive Officer Robert Willumstad, 63, will give up their jobs. Retired Allstate Corp. CEO Edward Liddy, 62, will be AIG’s new leader, according to a person familiar with the plans, who declined to be identified because the change hadn’t been formally announced. Allstate is the biggest publicly traded home and auto insurer in the U.S.

Barclays to Buy Lehman U.S. Units for $1.75 Billion (Update2)
By Ben Livesey and Yalman Onaran

Sept. 17 (Bloomberg) — Barclays Plc, the U.K.’s third- biggest bank, will acquire the North American investment-banking business of bankrupt Lehman Brothers Holdings Inc. for $1.75 billion, two days after abandoning plans to buy the entire firm.

The London-based bank is paying $250 million in cash for the Lehman businesses and $1.5 billion for the securities firm’s New York headquarters and two data centers, it said in a statement on its Web site today. The operations employ about 10,000 people, almost two-fifths of Lehman’s total.

Barclays President Robert Diamond seized on what he called a “once in a lifetime opportunity” to buy a business that ranks seventh in advising on U.S. mergers. The price is on par with the market value of Sanders Morris Harris Group Inc., a Houston, Texas-based brokerage with 617 workers, and is less than a third of the value of KBW Inc., a New York-based firm that employs 529.

“While this could be a positive development for the long run, given the current market conditions, we are skeptical that the market is going to reward any deal,” Derek Chambers, a London-based analyst at Standard & Poor’s Equity Research Ltd., said in a note to investors.

Lehman is selling off pieces of itself that weren’t included when the holding company filed the biggest Chapter 11 bankruptcy in history. Diamond said last month he wants the bank to take market share from Wall Street firms weakened by the credit crunch and break into the “top tier” of U.S. securities firms.

Reserve Money Fund Falls Below $1 a Share, Delays Withdrawals
by Christopher Condon

Sept. 17 (Bloomberg) — Reserve Primary Fund, the oldest U.S. money-market fund, became the first in 14 years to expose investors to losses after writing off $785 million of debt issued by bankrupt Lehman Brothers Holdings Inc.

Shareholders pulled more than 60 percent of the fund’s $64.8 billion in assets in the two days since Lehman folded. Losses on the securities firm’s debt forced the fund to break the buck, meaning its net asset value fell below the $1 a share price paid by investors, New York-based Reserve Management Corp., its closely held owner, said yesterday in a statement. Redemptions were suspended for as long as seven days.

Assets in money-market funds, considered the safest investments after cash and bank deposits, rose to a record $3.59 trillion this month as stock and commodity markets fell. Investor confidence has been shaken by the subprime-mortgage collapse, the demise of Lehman and Bear Stearns Cos., and the failure of 11 U.S. commercial banks. The first money-market fund to break the buck was the Community Bankers Mutual Fund in Denver, which had $82.2 million when it was liquidated in 1994 because of losses on interest-rate derivatives.

“This is going to unsettle investors and probably create further runs on other money funds,” Geoff Bobroff, a mutual- fund consultant in East Greenwich, Rhode Island, said in an interview.

Widespread withdrawals from money-market funds would aggravate the global credit crunch because they are major buyers of short-term debt issued by corporations and financial companies. The Reserve Management announcement came the same day the overnight Libor rate in U.S. dollars soared 3.33 percentage points to 6.44 percent, its biggest jump in at least seven years, according to the British Bankers’ Association.

(all articles referenced above can be found in their entirety at Bloomberg News: www.bloomberg.com)

AIG

5 thoughts on “And from Bloomberg…another day, another bailout”

  1. So….. whatever happened to Joe Strummer, or Joey Ramone?
    Listening to “The Story of the Clash”, where’s our punk society? Counter-culture?
    Hippy/punk, same shit. You all are brilliant, please continue. But London is burning, and all the kids are on glue. Please quit feeding your kids hoof.
    Fuck it, “I Will walk alone down the black muddy river, and sing me a song all my own”…..

  2. We’re using short term solutions right now, and not quite sure whether or not this is the end or the beginning of the sinkhole. At least, that’s what it sounds like to me.

    Anybody here interested in Googling bonddad? He’s a great economics writer and blogger, and posts, along with Jerome a Paris, on Kos. Bonddad sometimes writes on Huffington Post.

  3. Spread to Russia too…

    From the Guardian (UK) http://www.guardian.co.uk/business/2008/sep/17/marketturmoil.russia

    Trading was today suspended on Russia’s two main stock exchanges after shares fell dramatically for the second day in succession, forcing the central bank in Moscow to intervene.

    Regulators halted trading at midday (9am BST) on Russia’s main stock indices – the rouble-denominated Micex and the dollar-denominated RTS – following a similar suspension yesterday.

    Russia has been badly affected by the global financial crisis, and has suffered as stocks have sunk in Europe and Asia. But it has also been hit by the rapid fall in oil prices and the flight of foreign investors since the war in Georgia.

    (continued at link)

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