Time will tell as FBI probing bailout firms

Time for FBI investigation on those Banks.

The FBI is investigating Fannie Mae, Freddie Mac, Lehman Brothers and AIG - and their executives - as part of a broad look into possible mortgage fraud, sources with knowledge of the investigation told CNN Tuesday.

The sources would not speak on the record because the investigation is ongoing.
FBI spokesman Special Agent Richard Kolko had no comment on that information, but said 26 firms are currently under investigation as part of the bureau's mortgage fraud inquiry.
Earlier this month, FBI Director Robert Mueller told Congress that 1,400 individual real estate lenders, brokers and appraisers are now under investigation in addition to two dozen corporations.

"The FBI currently has 26 pending corporate fraud investigations involving subprime lenders," Kolko said. "As we have seen, this number can fluctuate over time; however we do not discuss which companies may or may not be the subject of an investigation."

The Crisis: A timeline
Previously, CNN has reported that lender Countrywide and Atlanta-based homebuilder Beazer (BZH) - which dropped out of the mortgage business early this year - are part of the investigation.

The sources said the probes of Fannie (FNM, Fortune 500), Freddie (FRE, Fortune 500), Lehman (LEH, Fortune 500) and AIG (AIG, Fortune 500) are believed to be in the early stages. One source said the government would be "remiss" if it didn't look into what happened at these companies because of the financial problems they are involved in and the actions of individuals running them.

Lehman Brothers and Freddie Mac declined comment on the matter. AIG spokesman Joseph Norton said, "We don't have details about the FBI investigation. Of course, we will cooperate with the FBI."

The United States is in the midst of a spiraling economic crisis fueled largely by the housing market. Earlier this decade, mortgage lenders relaxed restrictions on obtaining mortgages as home prices soared about 85% from 1996 through 2006 in inflation-adjusted dollars, creating a bubble. Then the bubble popped, and lenders - as well as mortgages - took the hit.

Money Crisis: Your questions answered
Last week, mortgage insurer AIG narrowly avoided bankruptcy when the federal government took 80% of its equity in exchange for an $85 billion loan from the Federal Reserve while Lehman filed the largest bankruptcy in American history. Earlier this month, the government took over mortgage giants Fannie and Freddie.

Bank of America (BAC, Fortune 500) bought Countrywide in July. Beazer dropped its mortgage arm early this year after an internal investigation - prompted by a Charlotte Observer investigation - found "evidence that employees violated [federal] regulations ... back to at least 2000." The company said it is cooperating with the federal investigation.

Other bank failures and takeovers have led to the Bush administration's current proposal to spend $700 billion to shore up the financial markets. The proposal is under consideration by Congress, where lawmakers from both sides of the aisle have balked at the proposal's lack of oversight provisions, among other issues.

As the mortgage industry began to unravel, the FBI, with assistance from the IRS, launched a broad investigation into mortgage fraud. In June, its Mortgage Fraud Task Force arrested more than 400 mortgage brokers, lenders, appraisers and other industry insiders who, it said, were responsible for more than $1 billion in losses.

Last month, a Mortgage Asset Research Institute (MARI) study found that the number of fraudulent loans issued during the first three months of 2008 skyrocketed 42% compared with the same period in 2007.

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Things would happen so easily, someone would have to answer for it for jail.

谢国忠：中国道路在于提高经济效率

[金融体系都是依赖于政府的隐性支持来维持运转，这样下去的话，金融体系将面临国有化的危险。所以美国政府最终还是在雷曼兄弟这件事上下了决心，划一条线(分清政府与市场的边界)，看市场自己能否消化。]

作者：谢国忠，独立经济学家

“这不代表宏观政策的变动，是为了提振市场的信心。”9月16日，独立经济学家、玫瑰石顾问公司董事谢国忠接受本报专访时如此解读。他是全球最早预言美国次贷危机的爆发及其深广的影响的专家之一。

他依旧对全球经济前景不抱乐观。他给出两个标志：金融机构的不良资产被市场重新定价并再流通——这是金融危机见底；公司能够融资并再投资，需求开始回归——这是实体经济见底。“美国经济见底并恢复估计要四五年。

中国希望靠美国经济复苏把我们拉上来，而必须要另外杀出一条血路来。”他坦言。
“杀出血路”的利器，就是提升中国经济效率，“改革是唯一出路。”而他认为，在财政收支、金融资本政策控制、价格体系政府控制中，存在着相当多低效率的地方。“降低政府在经济中的重要程度，可能解决中国目前面临的经济问题。”他说。

美国政府：恢复金融体系市场机制

《21世纪》：作为美国第四大投资银行，雷曼兄弟公司申请破产保护，有人将其称为“华尔街地震”。这究竟意味着什么？

谢国忠：雷曼兄弟公司破产，意味着将有价值6000亿美元的资产需要平仓，这当然会对市场造成相当大的恐慌。这里面有流动性的问题，也有资产价格重估的问题。

雷曼现在很多资产没怎么流通，价格都是大家猜测、想象的，如果它真的抛出来，资产价格就要重新定位，这会给很多金融机构带来很大的问题。如果用金融价格来衡量这些机构资产的话，那他们可能就资不抵债了。这也是市场目前非常担心AIG (美国国际集团，美国最大保险公司)的原因。

《21世纪》：此前，市场一直寄希望于美国政府像对待贝尔斯登那样，通过财政来支持雷曼，使其免遭破产厄运。但在最后时刻，美国政府没有动用这一招。怎样看美国政府这一次的作为？
谢国忠：这表明，美国政府最终还是想恢复金融体系的市场化机制。

这一年多来，金融体系都是依赖于政府的隐性支持来维持运转，这样下去的话，金融体系将面临国有化的危险。所以美国政府最终还是在雷曼兄弟这件事上下了决心，划一条线(分清政府与市场的边界)，看市场自己能否消化。

《21世纪》：美联储9月14日联合全球十大银行成立了首期700亿美元的市场救助基金，欧洲央行、英国央行也纷纷向市场注入流动性。这些举措是否为了救市？能否从根本上解决问题？
谢国忠：这些举措，目的都是为了提供资金保障，支持市场短期流动性。因为短期可能因为恐慌性抛盘、资产非理性下跌带来流动性问题。但这个问题不是很大，是一个技术性问题。
而基本面的问题在于，你这个资产到底值多少钱。如果按照美林之前出售抵押债务债券(Collateralized Debt Obligation，简称CDOs)的价格，一元钱只作价0.22元，如果这是一个真实价格的话，很多金融机构都要破产了。而这些央行的救助方案是不能改变这个基本现实的。

全球央行出手：危机仍未见底

《21世纪》：那么这个危机何时才会见底？见底的标志是什么？

谢国忠：金融机构的不良资产抛出后，让市场定价，然后这些资产可以重新有流通，这是金融危机见底的一个最重要的象征，而不能说像现在，不良资产还放在自己的账上，自己可以伪装一个价格。

《21世纪》：那全球实体经济的见底恢复会要多久？
谢国忠：金融危机的见底应该早于实体经济。实体经济见底恢复的标志是公司能够融资并再投资，需求开始回归。美国经济见底并恢复还要很久，估计要四五年。

《21世纪》：你对此这么悲观？
谢国忠：原来，美国经济的增长都是靠消费者借钱消费支撑的，这次金融危机也是因此导致的。下一轮经济增长靠什么？不能再回到老路吧？

这次，美国要韬光养晦很久了，不能再虚胖，而要瘦身，再长肌肉，需要的时间会很长。所以，我的观点是，中国不要再等待，希望靠美国经济复苏把我们拉上来，而必须要另外杀出一条血路来。

中国对策：财政“托一把”经济

《21世纪》：在全球经济动荡、面临衰退风险的时候，中国怎样才能“另外杀出一条血路来”呢？

谢国忠：核心问题是，经济的发展不能靠股市、楼市来支撑，中国接下来的路一定是要提高经济效率，改革是唯一出路。

中国经济里面低效率的地方太多了，提高效率，中国经济就可以上一个新台阶。别老说自己的经济增长那么快，你的基础还是很低的。

《21世纪》：你的意思是还是要坚持市场化的制度变革。但短期内政策应如何调整以应对全球经济风险呢？下调人民币贷款基准利率和部分存款类金融机构人民币存款准备金率，是中国政府宏观政策变动的一个信号么？接下来是否会进入降息周期？

谢国忠：这不是宏观政策的变动，是为了提振市场的信心。
准备金率下调是应该的，是为了保持银行体系流动性的正常水平。因为原来是热钱大量流入，现在是热钱向外流，但是要根据外汇储备的升降速度做适度调整。利率大幅下降目前还不可能，通胀过几个月就会消失的想法并不现实。

《21世纪》：下一步的关键在哪里？

谢国忠：从短期来看，两方面的政策很重要。
从稳定需求来看，财政政策对经济应该“托一把”。考虑到出口企业和地产开发商的资产流动性问题，中国经济增速放缓越来越明显。一些财政刺激措施可以做“软着陆”的保障，例如加快城市基础设施建设、铁路网修建等，来缓冲下行风险，对经济长期发展也有好处。
同时，要增加地方政府的财政收入，解决他们的偿债能力问题。
中国企业存在偿还债务问题。“三角债”特别是以应收账款形式存在的债务在不断堆积，问题的源头可能是地方政府缺少资金。

《21世纪》：中长期来看呢？

谢国忠：接下来就应该找到经济低效率的地方并加以改变。在财政收支、金融资本政策控制、价格体系政府控制中存在着相当多低效率的地方。
多年来，中国消费率持续走低，刺激消费政策一直难以真正奏效，很重要的一个原因就是政府占有的收入比重过高。

中国的税收已经达到历史最高水平。今年预算收入可能达到6万亿人民币，占GDP21％，是20世纪90年代最低水平的两倍。国有企业利润也可能达到GDP的6％。还有大量预算外收入。
总体而言，政府收藏了GDP三分之一的财富，或者是国民生产净值(GDP减去资本贬值)的40％。在过去十年，中国经济明显地转向政府这边。降低政府在经济中的重要程度，可能解决中国目前面临的经济问题。

中国可能有潜能在一个良好的投资回报率在未来一年。美国有问题经济，中国的经济可能以更快的速度超过美国。

Andy xie:- bury the Greenspan put and let people get what they deserve.

The global credit bubble is bursting and there are many out there who “deserve what is coming to them,” writes Andy Xie, now an independent economist in Shanghai, in Tuesday’s FT.

In full finger-pointing stride, Xie, who resigned last year as Morgan Stanley’s chief Asia economist after some people took exception to his dim view of Singapore, says “this bubble is primarily leverage financing for owning risky assets”.

”The people who were responsible for what happened played with other people’s money, marketed arcane financial products with false promises of fat profits, but stuffed their own pockets with big bonuses. Neither these masters of the universe nor their greedy but naïve investors deserve to be bailed out”, he says.

The central banks bear equal responsibility in the current debacle, says Xie. After the 9/11 terrorist attacks on America, they slashed interest rates and “provided the cheap money for this leverage bubble”.

“They must not flood the world with liquidity again to sustain this bubble or create another,” warns Xie. Rather, they should focus on “price stability, not financial market stability, and should provide liquidity only to contain the multiplier effect of the bubble bursting on the economy”.
Nor should central banks stimulate to “avoid recession at any cost”, as that would only worsen the “excesses” in the global economy and make the inevitable correction more painful, he says. “Business cycles are not bad. Excesses must be followed with cleansing.”

Wall Street also comes in for its share of vitriole. In the past five years, says Xie, the collapsing agency business has pushed banks into betting their own money for profit and selling “high margin” structured products to their clients: “Their eagerness for selling new and poorly understood products, such as sub-prime mortgage derivatives, is a major factor in the current bubble”; and, like after the junk bond bubble of the 1980s, “lawsuits may hit Wall Street for years to come”.

Rating agencies, of course, “should share the guilt”, says Xie. “They give high ratings to sub-prime derivatives with high seniority in payment. Unfortunately, the repayment behaviour of the sub-prime borrowers depends on macro conditions… Like in the previous debt bubbles, rating agencies behave like momentum traders. The ratings are supposed to give guidance to investment risk during bad times, not to be downgraded when the situation turns sour.”

And let’s not forget the “ballooning” hedge fund industry. “As their funds have become big, they have focused on their 2 per cent management fees rather than the share in investment profit,” says Xie. “So they have focused on gathering assets by over-promising.” Some funds specialise in illiquid assets such as derivative products of sub-prime mortgages and can “report whatever pefromance they want” as long as they do not face redemption, he says. “As soon as redemptions happen, they cannot even sell their stuff and have to refuse withdrawals.”

If central banks try to bail out Wall Street, it would lead to high inflation for years, he warns. The inflationary effect of loose monetary policy of the past was offset by the deflationary effect of globalisation, he adds. “Now China and other developing countries are experiencing high and rising inflation. Loose money will go straight into inflation. The vicious cycle of the wage-price spiral of the 1970s has not occurred as both labour and capital still believe in the inflation-fighting credibility of the central banks. If they loosen up again to bail out Wall Street, this credibility may be squandered. The ensuing wage-price spiral could ruin the global economy for years to come.”

Xie’s conclusion is that central banks should now grab the opportunity to restore their credibility: “Markets have been taking more risk than they should because they believe that central banks will come to their aid during times of crisis, like now. The penchant of Alan Greenspan, former Fed chairman, to flood the market with liquidity during financial instability is the genesis of this ‘central bank put’. As long as this expectation remains, financial bubbles will occur again and again. Now is the time to act. Let the crooks go bankrupt. Central banks should bury the Greenspan ‘put’ for good.”

Andy Xie also goes on to distribute blame:-
“In the past five years, Wall Street has changed dramatically and that may not be for the better. The collapsing agency business has pushed banks into betting their own money for profit and selling “high margin” structured products to their clients. Their eagerness for selling new and poorly understood products, such as sub-prime mortgage derivatives, is a major factor in the current bubble. Like after the junk bond bubble of the 1980s, lawsuits may hit Wall Street for years to come.

Rating agencies should share the guilt. They give high ratings to sub-prime derivatives with high seniority in payment. Unfortunately, the repayment behaviour of the sub-prime borrowers depends on macro conditions. As soon as property prices drop significantly, they tend to default at the same time and the seniority in repayment is not worth much. Like in the previous debt bubbles, rating agencies behave like momentum traders. The ratings are supposed to give guidance to investment risk during bad times, not to be downgraded when the situation turns sour.

The ballooning hedge fund industry is also culpable. As their funds have become big, they have focused on their 2 per cent management fees rather than the share in investment profit. So they have focused on gathering assets by over-promising. Some funds specialise in illiquid assets such as derivative products of sub-prime mortgages. As long as they do not face redemption, they can report whatever performance they want. As soon as redemptions happen, they cannot even sell their stuff and have to refuse withdrawals.”

Andy Xie finishes:-
“If central banks try to bail out Wall Street, it would lead to high inflation for years. The inflationary effect of loose monetary policy of the past was offset by the deflationary effect of globalisation. Now China and other developing countries are experiencing high and rising inflation. Loose money will go straight into inflation. The vicious cycle of the wage-price spiral of the 1970s has not occurred as both labour and capital still believe in the inflation-fighting credibility of the central banks. If they loosen up again to bail out Wall Street, this credibility may be squandered. The ensuing wage-price spiral could ruin the global economy for years to come.

What is occurring is an opportunity for central banks to restore their credibility. Markets have been taking more risk than they should because they believe that central banks will come to their aid during times of crisis, like now. The penchant of Alan Greenspan, former US Federal Reserve chairman, to flood the market with liquidity during financial instability is the genesis of this “central bank put”. As long as this expectation remains, financial bubbles will occur again and again. Now is the time to act. Let the crooks go bankrupt. Central banks should bury the Greenspan “put” for good.”

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NOTE: Andy Xie’s article is the most over-the-top article on the FT , this will help you see the whole picture in term your investment.

We shall see US govt. jail Wall street greed one by one in the coming future as after the bubble have gonna.

"The greed of Wall street"

There is news on Lehman Files For Bankruptcy, BofA To Buy Merrill

News from CNN, Date: 15th Sept. 2008

THE EVENTS: Two of Wall Streets' venerable investment giants have been brought to their knees - and an insurance powerhouse hangs by its fingertips. Lehman Brothers Holdings Inc. (LEH) filed for bankruptcy protection, while Merrill Lynch (MER) agreed to be acquired by Bank of America Corp. (BAC) for $50 billion.

Meanwhile, another victim of the ongoing credit and housing crunch, insurance giant American International Group Inc. (AIG), is desperately trying to raise capital.

MARKET REACTION:
Merrill shares gained 26% to $21.59 as investors expressed relief, but Bank of America fell 14% to $28.88. Lehman stock fell 95% to 19 cents a share and AIG dropped 47% to $6.34.
In the broader market, the Dow Jones Industrial Average was down 223 points at 11198, Nasdaq was off 26 at 2234 and the S&P 500 down 21 at 1230.
Treasurys soared as investors scrambled for safety.

The U.S. dollar was off its overnight lows after initial risk aversion moves.
Oil futures slid to a seven-month low as speculators fled for perceived safe havens amid turmoil on Wall Street.

Gold prices jumped nearly 3%.
European stock indexes were down 4% to 5%.
Equity indexes in Asia were off about 4% with the bourses in Japan, China and Hong Kong closed for holidays.

LEHMAN BROTHERS SEEKS PROTECTION: Wracked by massive real-estate-related losses, Lehman Brothers Monday filed for Chapter 11 protection after a feverish weekend of negotiations to attract a potential buyer. But the two most likely suitors, BofA and Barclays PLC (BCS), walked away after the U.S. government said it would not backstop Lehman's troubled assets to facilitate a sale.

Federal regulators assured Lehman brokerage customers that their accounts will be protected and transferred to other brokerage firms. Meanwhile, Lehman employees received few answers Monday about the status of their jobs. Thousands are expected to be laid off.

MERRILL ABSORBED AMID CRISIS: Merrill, in a rushed bid to ride out the storm sweeping Wall Street, agreed to be taken over by BofA in a $50 billion all-stock transaction. Through the weekend, federal officials strongly encouraged the deal, fearing Merrill would be the next financial house to approach the brink after Lehman.

AIG SEEKS CAPITAL: AIG - hobbled by credit default swap investments that have gone sour - spent the weekend trying to raise $40 billion to avoid a credit downgrade which would let counterparties pull their capital from deals with the firm. AIG Chief Executive Robert Willumstad made an extraordinary appeal to the Fed for temporary funding to tide it through the crisis.

WALL STREET CIRCLES THE WAGONS: Ten major commercial and investment banks announced Sunday they would pool $70 billion of their own money to create a borrowing facility that they could tap into to help them ride out the crisis.

U.S. TAKES STEPS TO SUPPORT FINANCIAL MARKETS: U.S. regulators Sunday announced a series of steps - including an expansion of the Federal Reserve's credit facilities - in hopes of stabilizing financial markets after a tumultuous weekend. The moves are designed to make it easier for banks to gain access to emergency credit.

WHAT THEY SAID:
Bank of America Chief Executive Ken Lewis said he felt "no pressure" from federal government regulators to acquire Merrill.

"Today we are looking forward. This weekend's discussions made clear that both market participants and regulators in this country and abroad recognize the need to support market stability and remove uncertainty as they address current challenges," Treasury Secretary Henry Paulson said.

"Monday will be a day of reckoning for the financial markets," said Carlos Mendez, senior managing director of ICP Capital.

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Where in earth having so much money or Huge Capital for those failure banks to refinance their debts? can't US govt. help those banks or protect those banks?

I think to get out of this crisis must able to rise even more fund than those debts adding together that will over come the crisis. The Crisis is meet where the money is short of cash to run the businesses.

America has been number one for more than a centry. The number one are in their economy. are China able to over take it fast enough? are China meet with those standard that America alway meet.

Is there a greed and fear factor in the crisis?

Treasurys jump that cause Wall Street crisis escalates.

Has US crisis over?.....

U.S. debt had gains most since September 2001...

Treasurys jumped Monday, pushing yields down by the most since September 2001, as investors clamored for the safety of government debt in the wake of Lehman's bankruptcy, Merrill Lynch's demise and AIG's need for cash.

Two-year note yields dropped 37 basis points, or 0.37%, to 1.86%, the biggest decline since Sept. 17, the first day bonds traded after the terrorist attacks. The yield is the lowest since April.

"It's definitely an extraordinary set of circumstances and I don't know if it's a culmination," said Jason Brady, who helps oversee about $6 billion in fixed-income assets at Thornburg Investment Management. "There isn't a lot of hope that this is going to turn around anytime soon. People would rather own things they don't have to think about so are buying Treasurys."

Bank of America, which absorbed failing mortgage lender Countrywide earlier this year, agreed to buy Merrill Lynch in the hopes of preventing the demise of yet another Wall Street giant.

Lehman filed for Chapter 11 bankruptcy, ending the 158-year-old Wall Street firm's run and rattling the foundation of the global financial system.

"For markets, the question is whether the liquidation of Lehman's illiquid assets will force other dealers to mark down the value of their holdings, resulting in another wave of write-downs and fire-sales that could destabilize markets," said BMO Capital Markets analysts.

Analysts also note the economic ramifications of potentially thousands of layoffs from all four firms because of overlapping positions or attempts to streamline the business. And as financial firms tighten their belts, it will also likely mean less lending to individuals and businesses, slowing down economic activity even more.

Ten-year note yields, which move inversely to prices, dropped 19 basis points to 3.54%.

Interest-rate futures have jumped as traders almost fully expect the Federal Reserve to reduce its benchmark rate at its meeting tomorrow to 1.75% from 2% to make borrowing and lending more feasible for a battered financial system.

"We believe that the gravity of the situation requires a Fed ease of 50 basis points and a removal of the current 25 basis point premium of the discount rate" at which banks can borrow from the Fed directly, said T.J. Marta, income strategist at RBC Capital Markets. "Such a move would put the Fed 'ahead' of the market."

Futures also show an 80% chance of another quarter percentage point cut at the central bank's meeting on Oct. 31.

The Fed also expanded its loan programs for banks and other financial institutions "to mitigate the potential risks and disruptions to markets," Chairman Ben S. Bernanke said in a statement.

The news are from MarketWatch Date: 15th Sept. 2008

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Is US Dollar flooding the whole world? Since near to all most everything are rate in USD......
I guess US should be able to deal with the crisis it just because there isn't any other country that bigger than US economy...in other word if they can't no single one are able bail them out fast.

This will have to take a long time than expected with the many country finance strength.....