Tuesday 30 September 2008

Bush Warning over Bailout Delay

George Bush says the cost of not acting will be higher than the $700 billion rescue deal >>>

BBC: US President George W Bush has warned the US economy is at a "critical moment", and vowed to get his Wall Street rescue plan through Congress.

He said the consequences would be "painful and lasting" if the $700bn (£380bn) deal rejected by the US House of Representatives was not passed.

He offered reassurances to citizens of the US and wider world that the current political deadlock would be resolved.

The New York stock market rallied strongly after Mr Bush's statement.

The Dow Jones index closed up 4.7%, recouping some losses from Monday's rout.

European stocks bounced up and down, while most Asian markets finished the day down.

The European Union earlier urged Washington to act and solve the credit crisis, amid fears America was lurching towards a financial crisis unmatched since the 1930s Great Depression. Bush Warning over Bail-out Delay >>> | September 30, 2008

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Fillon : «Nous ne laisserons
 pas tomber les banques»

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Photo de François Fillon, le premier ministre de France, grâce au Figaro

LE FIGARO: Le premier ministre, qui a réitéré mardi à Beaune son appel à «l'unité nationale» face à la crise, estime qu'aucun établissement financier européen «ne devait être acculé à la faillite».

François Fillon au chevet des banques menacées par la crise. Alors que les gouvernements belges, français et luxembourgeois ont injecté ensemble 6,4 milliards d'euros dans Dexia mardi matin, le premier ministre François Fillon a affirmé dans l'après-midi, en clôture des journées parlementaires du Nouveau Centre à Beaune (Côte-d'Or), sa «conviction qu'aucune grande banque européenne ne devait être acculée à la faillite».

«Les Etats doivent assumer leurs responsabilités afin de garantir la sécurité des déposants et le fonctionnement de l'économie», a-t-il lancé, soulignant que la faillite de Dexia «aurait provoqué un effondrement d'autres établissements financiers». «Nous ne laisserons pas un établissement financier tomber», a-t-il insisté, et l'Etat utilisera «tous les moyens qui sont à notre disposition, sans dogmatisme». «Lorsqu'il faudra faciliter l'adossement d'une banque à une autre en Europe, nous l'encouragerons. Mais lorsqu'il faudra, comme nous l'avons fait avec Dexia, prendre une participation directe, nous le ferons aussi». Fillon : «Nous ne laisserons
pas tomber les banques» >>> Samuel Potier (lefigaro.fr), avec AFP | 30.09.2008

The Dawning of a New Dark Age (Broché) >>>
The Dawning of a New Dark Age (Relié) >>>
US-Finanzkrise: Der Kongress rebelliert gegen George W. Bush

Video anschauen: Bush bittet erneut um Finanzhilfe: US-Präsident Bush hat an die Abgeordneten des Kongresses appelliert, das Rettungspaket für die Finanzwirtschaft doch zu verabschieden. Sein letzter Antrag war gescheitert. >>>

WELT ONLINE: Angst, Ärger und Wut: Das sind die Gründe des US-Kongresses, das Rettungspaket abzulehnen. Die Parlamentarier empört nicht nur die Eile, mit der sie das 700-Milliarden-Paket verabschieden sollen. Wütend sind sie vor allem auf den US-Präsidenten, der die gierigen Banker mit Steuergeld subventionieren will.

Um 8.45 Uhr Washingtoner Zeit wandte George W. Bush sich zum dritten Mal binnen sechs Tagen an die Öffentlichkeit. „Ich versichere den Bürgern unseres Landes und der Welt, dass der Gesetzgebungsprozess im Kongress nicht zu Ende ist. Es spielt keine Rolle, auf welchem Weg ein Gesetz zu Stande kommt, wichtig ist, dass wir ein Gesetz bekommen.“ Renten und Löhne könnten gefährdet sein, wenn das Gesetz nicht komme. An die Adresse marktorientierter republikanischer Abgeordneter sagte Bush: „Es ist nicht so, dass wir etwa die Wahl zwischen Staatsintervention und dem eleganten Funktionieren des Marktes hätten. Wir stehen vor der realen Gefahr des wirtschaftlichen Absturzes von Millionen Amerikanern.“

Bushs kurze Rede war die Reaktion auf eine der schwersten Niederlagen seiner Amtszeit. Mit 228 gegen 205 Stimmen hatte der Kongress am Vortag um halb zwei mittags den Kompromiss zum Notpaket abgeschmettert, den das Weiße Haus mit beiden Fraktionen des Unterhauses ausgehandelt hatte. Es war nach dem Scheitern des Krisengipfels mit Barack Obama und John McCain am Donnerstag der zweite Rückschlag.

Diesmal traf er auch die Demokraten. Mit „Nein“ stimmten zwei Drittel der Republikaner (133 von 199), und zwei Fünftel der Demokraten (95 von 235 Demokraten). Gegen das Paket stimmten die Mehrheit der republikanischen Abgeordneten aus George W. Bushs Heimatstaat Texas, ein Drittel der Demokraten aus Barack Obamas Heimatstaat Illinois und alle Abgeordneten aus John McCains Heimat Arizona. Gegen das Paket stimmten eine Reihe der engsten Verbündeten der Demokraten-Fraktionschefin, Nancy Pelosi. Mit „Nein“ stimmten auch etliche parlamentarische Finanzfachleute. Ein Drittel der demokratischen Mitglieder des Bankenausschusses und die Hälfte der Republikaner dort sagte „Ohne uns“. Aus dem Haushaltsausschuss gesellten sich ihnen aus beiden Parteien Mitglieder der Fachgruppen für Banken und für die Regulierung der Kapitalmärkte dazu.

Beide Parteien schafften es nicht, eine eigene Mehrheit für das Notpaket zu mobilisieren; und beide Seiten wollten das auch nicht. Das Bush-Notpaket war politisch viel zu heiß für einen Alleingang mitten im Wahlkampf. Der Kongress rebelliert gegen George W. Bush >>> Von Torsten Krauel | 30. September 2008

NZZ Online:
«Von allen guten Geistern verlassen»: EU nennt Ablehnung des Hilfspakets verantwortungslos

EU-Handelskommissar Peter Mandelson hat die Ablehnung der milliardenschweren Finanzhilfen im US-Kongress als verantwortungslos verurteilt. «Die Abgeordneten sind von allen guten Geistern verlassen», sagte Mandelson am späten Montagabend. Auch der britische Premier Brown zeigte sich enttäuscht. >>>
| 30. September 2008

The Dawning of a New Dark Age (Taschenbuch) >>>
The Dawning of a New Dark Age (Gebundene Ausgabe) >>>
The Wall Street Crash of 1929

Part 1:


Part 2:


Part 3:


Part 4:


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An Unlikely Alliance

THE GUARDIAN: Islamists and the radical left have little in common apart from a hatred of the west and western capitalism

What do the far left and Islamists have in common? Not a lot, you may say, but you would be wrong. Despite being ideologically at the extremes of the political spectrum, they in fact share one worrying trait.

The old rule that "the enemy of my enemy is my friend" seems to be shaping the relationship between the hard left and Islamists in Britain today. By having a common foe in western capitalism, which they conveniently blame for all of the world's ills, they have developed a marriage of convenience against the odds.

This alliance can also be seen on the international stage as Hugo Chávez holds hands with Iran's Ahmedinejad while our own Ken Livingstone hugs Yusuf al-Qaradawi. It was also evident at anti-Iraq war rallies where CND, the Socialist Workers Party and Respect shared platforms with the likes of the Muslim Association of Britain (MAB) and the British Muslim Initiative which are schismatic offshoots of radical Islamism.

Azzam Tamimi (spokesman for MAB) when asked by BBC Hardtalk's Tim Sebastian if he was prepared to blow himself up in Palestine, replied: "If I can go to Palestine and sacrifice myself I would do it. Why not?"

Now don't get me wrong – I'm all for people of different backgrounds coming together and working in harmony. But it worries me slightly when the only thing that's really binding these divergent factions is not their love for all humanity or their desire to see a totalitarian state, but their common hatred of the west which can be called "westophobia". There, I've used it, the one word that can actually sum up all the various groupings that are ideologically driven to view the west and western capitalism as "the enemy". An Unlikely Alliance: Islamists and the radical left have little in common apart from a hatred of the west and western capitalism >>> Ghaffar Hussain | September 30, 2008

Cross-posted at A New Dark Age Is Dawning >>>

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Monday 29 September 2008

$US700b Bailout Deal Voted Down

SYDNEY MORNING HERALD: Wall Street's benchmark Dow index has suffered its worst single-day points hit ever after a $860 billion ($US700 billion) financial bailout package failed to pass the US House of Representatives.

The Dow lost about 778 points, or 6.98%, posting its biggest daily percentage decline since the October 1987 stock market crash, while the benchmark S&P 500 also had its worst day in 21 years after the House sent the bailout plan to defeat by a vote of 228 to 205.

The tech-heavy Nasdaq had its worst day since April 2000 when the Internet bubble collapsed.

Market fear was deep and widespread, as investors dumped stocks for the relative safety of US government bonds. The Chicago Board Options Exchange Volatility Index, Wall Street's main barometer of investor fear, jumped 39% to 48.40, a nearly six-year high, and was at 46.72 at the close.



''I am shocked. Credit markets were struggling even with the prospect this bill was going to get passed. Now the bill doesn't get passed and it just throws one more monkey wrench into the mix,'' said Bob Doll, global chief investment officer of equities at BlackRock Inc, one of the world's largest asset managers.



The failure of the bailout bill means the US Treasury now has very limited capacity to bailout firms in the future, and economists are predicting that credit markets will seize up, preventing businesses and people from getting loans for ordinary day-to-day business activities, for college fees, for cars, and for appliances as well as for housing. Consumer and business interest rates are likely to rise sharply. $US700b Bailout Deal Voted Down >>> Anne Davies, Washington | September 30, 2008

SYDNEY MORNING HERALD:
Dollar Hammered as Bailout Voted Down >>> | September 30, 2008

Watch BBC video: Henry Paulson reacts to the failure of the rescue package >>> | September 29, 2008

TIMESONLINE:
US Banking Bailout in Chaos after Shock House of Representatives Vote: The financial system lurched closer to a catastrophic breakdown tonight after the US Congress dramatically rejected a bailout plan designed to restore confidence to paralysed banks.

Wall Street suffered one of its worst days in history. In 24 hours five banks across the West, including Britain’s Bradford & Bingley, had to be rescued to avoid insolvency.

With plans for the biggest rescue of Wall Street since the Great Depression in tatters, the Dow Jones industrial average of shares dived almost 800 points, losing 7 per cent of its value. It was the worst one-day points fall and the worst percentage fall since Black Monday in 1987.
>>>
| September 30, 2008

THE GUARDIAN:
Panic grips world's markets: Shock as American rescue plan rejected on a day of nationalisations and bail-outs >>> Andrew Clark in New York | September 30, 2008

THE TELEGRAPH:
Asian Shares Fall after US Rejects Bail-out Plan: Asian markets slumped as fears of escalating financial turmoil triggered panic selling after US politicians unexpectedly rejected a financial rescue plan. >>> By Jessica Salter | September 30, 2008

THE TELEGRAPH:
US Economy: $700 billion Wall Street Bail-out Rejected on Meltdown Monday 2: The $700 billion bail-out to save the global financial system from potential collapse has been rejected by US politicians. >>> By Robert Winnett | September 30, 2008

LE FIGARO:
Plongeon historique 
de Wall Street : La Bourse de New York a lourdement chuté, après que les places européennes ont accusé le coup de plusieurs déroutes bancaires.

Le scénario catastrophe se réalise. La Chambre des représentants a rejeté hier le plan Paulson, censé sauver le système bancaire américain de l'implosion. Wall Street, pris par surprise, a très mal réagi. L'indice Dow Jones a connu un plongeon historique (en points). Il a reculé de 6,98 %, le Nasdaq de 9,14 % et le S&P 500 de 8,81 %.

Le plan prévoyait l'octroi au Trésor américain de 700 milliards de dollars pour financer un programme de rachat d'actifs bancaires dévalorisés. Hier matin encore, le président Bush avait imploré les députés américains de surmonter leurs doutes à l'égard de ce plan et de se ranger derrière les leaders des deux partis qui s'y étaient finalement ralliés.

Hier soir, le secrétaire au Trésor, Henry Paulson, visiblement frustré par la fronde des élus, a expliqué qu'il continuerait de « travailler avec les législateurs. L'enjeu est trop important pour que l'on abandonne. Nous cherchons le moyen de faire passer quelque chose le plus vite possible ».

La crainte des autorités américaines est désormais que les marchés de crédit soient paralysés du fait du manque de confiance dans la solidité de banques dont les bilans sont accablés de créances immobilières douteuses. « Les marchés de crédit vont se retrouver encore plus paralysés », estimait à chaud Bill Gross, patron de Pimco, le plus grand fonds obligataire du monde. Un tel scénario perturberait gravement le fonctionnement des systèmes de paiement, provoquerait des faillites de banques et d'entreprises et plongerait vite l'Amérique dans une grave récession.
>>>
Pierre-Yves Dugua (à Washington) | 30.09.2008

TORONTO STAR:
Capitalism in Limbo as Renegades Kill Bailout: In a stunning rebuke to U.S. President George W. Bush and GOP presidential candidate John McCain, Republicans in the U.S. House of Representatives, joined by many Democrats, yesterday killed a bailout scheme promoted by the administration to rescue a U.S. financial system in paralysis.

Stock markets predictably nose-dived on the news, with Toronto suffering some of the greatest damage.

The S&P/TSX, heavy with energy stocks, was dealt a double whammy, suffering one of its largest one-day declines on record, at 6.9 per cent, on worries about the unresolved world capital crisis and yesterday's $10.52 (U.S.) collapse in oil prices, to $96.37 a barrel.

(Oil is now down 35 per cent from its July peak.)

Bush and McCain put their political capital on the line to gain passage of the Bush-sponsored $700-billion bailout plan, which would have enabled the U.S. Treasury Department to begin purchasing soured, or "toxic," mortgage and other loans from U.S. banks – a move designed to increase their solvency so they can resume business as usual.

Yet, despite exhortations from Bush, who twice has addressed the nation on the urgent need for passage of the rescue package, and from McCain, who stayed in the capital over the weekend making calls to recalcitrant Republican members of Congress to win their reluctant support for the bailout bill, 133 GOP and 95 Democratic members of the House joined to defeat the bill in a 228-205 vote. >>>
David Olive | September 30, 2008

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’Toxic’ Wall Street $700 Billion Bailout Rejected

THE TELEGRAPH: Congressional leaders and the White House have rejected an unprecedented, $700 billion rescue plan designed to ease the flow of credit and restore confidence in the world’s biggest economy.

The lower House of Representatives has defeated the Emergency Economic Stabilisation Act throwing efforts to calm the financial crisis rocking global markets into turmoil.

The vote must now move to the Senate for final approval.

News of the massive bailout package had done nothing to improve sentiment in markets opening ahead of the United States.

As well as the Stock Exchange, the main indices in Japan, Germany and France all fell by between 1.3 and 2.9 per cent.

Despite a 7.30am statement by George W Bush praising the bill as “strong and decisive legislation” that “will help restart the flow of credit”, Wall Street, the target of the bailout, was fearful that the government’s plan to buy bad debt wouldn’t be sufficient to resuscitate nearly frozen credit markets. US Economy: 'Toxic' Wall Street $700 Billion Bailout Rejected >>> By Alex Spillius in Washington | September 29, 2008

THE NEW YORK TIMES:
House Rejects Bailout Package, 228-205; Stocks Plunge: WASHINGTON — In a moment of historic import in the Capitol and on Wall Street, the House of Representatives voted on Monday to reject a $700 billion rescue of the financial industry. The vote came in stunning defiance of President Bush and Congressional leaders of both parties, who said the bailout was needed to prevent a widespread financial collapse. >>> By Carl Hulse and David M Herszenhorn | September 29, 2008

THE NEW YORK TIMES:
Dow Falls Nearly 700 Points >>> By Michael M Grynbaum | September 29, 2008

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Islamic Banking and Decisive Cooperation

ASHARQ ALAWSAT: Riyadh -The Islamic banking sector suffers from unsystematic efforts, lack of cooperation between institutions and the inclination towards self interest rather than the benefit of the industry as a whole. As a result, competition between these institutions has at times been unfair as it has hindered the unification of efforts and potentials towards raising the products and services offered by this industry to an international standard that meets the requirements of those who deal with the industry and to accomplish a real independent character that is expressed through the true religion.

The lack of cooperation is clearly seen in the lack of a standard model or contract to be circulated amongst Islamic financial institutions or institutions that offer Islamic financial services for any products within this industry on the local, regional or international levels. This could have been accomplished regarding standard products, the specifications of which are fixed except for pricing, profiting and guarantees for example Murabaha investment products between financial institutions, and which is used by many financial institutions nowadays to fund each other.

Like credit cards, direct individual funding and deposits, one would find that every Islamic financial institution or financial institutions that offer Islamic services has its own system regarding cards, funding products or deposits. However even if such private forms and contracts differ in shape or procedure, they are the same as there is no added value to this variation from which the industry or the customer could benefit. This variation in fact becomes an additional cost to the customer, and this has a negative effect on the efficiency of the Islamic banking product as well as competition with other conventional products available on the market.

In addition, such variation in standard products and the lack of an agreed form for these products between the Islamic financial institutions and the failure to meet international standards is a major challenge that the industry faces at present. Islamic Banking and Decisive Cooperation >>> By Lahem al Nasser | September 22, 2008

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Financial Crisis: Capitalism Is Under Attack - and Cameron Is Steadfast in Defence

THE TELEGRAPH: The next election - both here and in the US - is shaping up to be a referendum on free market economics. All those old anti-capitalist diatribes are being resuscitated with triumphal delight by the side that definitively lost the great political argument of the last century. 



The Tories will not just be running against Labour and its current leadership. They will be running against a reinvigorated soft Marxist ideology which will infect the news coverage and analysis, against those who are saying: "You see, this is what comes from allowing the economic fate of the people to be determined by the market: ruin and instability followed by the inevitable need for government intervention. Greed and personal irresponsibility have been permitted to run rampant and the free market has now been utterly discredited."

And here, they chortle, is the ultimate irony: even the United States, the most militantly capitalist society in the world, is being forced to resort to massive state intervention - nationalising debt, of all things - to avoid a banking collapse. The game is up. Big government is vindicated. As Gordon Brown put it in his speech to the Labour conference, "Those who don't believe in the potential of government shouldn't be trusted to form one." Read that as, "Those of us who believe in the power of the centralised state don't have to apologise any more." 



It is going to take considerable strength of nerve and clarity of mind to reject the absurd premise on which this argument is based: to say that capitalism has been fatally compromised by the behaviour of a particular group of irresponsible individuals is like saying that democracy was irretrievably discredited by the fact that Adolph Hitler was once elected to office. I am hugely relieved to see that David Cameron is holding out against this tide. 



He is stating unequivocally that the idea that a state takeover of institutions is the only alternative to failures of judgment and incompetence in private finance is both wrong and dangerous.

Banks being run by reckless bankers put the country's private wealth - and its public wealth, since the latter is derived from the former - at stake. But politicians and their appointees are no more infallible than civilian individuals in the soundness of their decisions, and when they screw up they take the wealth of the entire tax-paying nation down with them in one step. Quite apart from the fact that it was the policies of politicians on easy money that permitted the bankers to run amok.

So, all things considered, Mr Cameron must be on the right track with his plan to allow the independent Bank of England to take responsibility for restructuring failing banks as an alternative to nationalisation which would put them under the direct control of government. Financial Crisis: Capitalism Is Under Attack - and Cameron Is Steadfast in Defence >>> By Janet Daley | September 29, 2008

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Sunday 28 September 2008

Redolent of the Wall Street Crash of 1929: Banker Leaps to His Death in Front of Express Train

MAIL Online: The City was in shock last night after the apparent suicide of a millionaire financier haunted by the pressures of dealing with the credit crunch.

Kirk Stephenson, who was married with an eight-year-old son, died in the path of a 100mph express train at Taplow railway station, Berkshire.

Mr Stephenson is believed to have taken his own life after succumbing to mounting personal pressures as the world’s financial markets went into meltdown.

The death of the respected 47-year-old City figure evokes memories of the 1929 Wall Street crash in America… Credit Crunch Banker Leaps to His Death in Front of Express Train >>> By Christopher Leake | September 27, 2008

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Breakthrough Reached in Negotiations on Bailout

THE NEW YORK TIMES: WASHINGTON — Congressional leaders and the Bush administration reached a tentative agreement early Sunday on what may become the largest financial bailout in American history, authorizing the Treasury to purchase $700 billion in troubled debt from ailing firms in an extraordinary intervention to prevent widespread economic collapse.

Officials said that Congressional staff members would work through the night to finalize the language of the agreement and draft a bill, and that the bill would be brought to the House floor for a vote on Monday.

The bill includes pay limits for some executives whose firms seek help, aides said. And it requires the government to use its new role as owner of distressed mortgage-backed securities to make more aggressive efforts to prevent home foreclosures.

In some cases, the government would receive an equity stake in companies that seek aid, allowing taxpayers to profit should the rescue plan work and the private firms flourish in the months and years ahead.

The White House also agreed to strict oversight of the program by a Congressional panel and conflict-of-interest rules for firms hired by the Treasury to help run the program. Breakthrough Reached in Negotiations on Bailout >>> By David M Herszenhorn and Carl Hulse | September 27, 2008

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Financial Crisis: Bradford & Bingley Likely to Be Nationalised

THE SUNDAY TELEGRAPH: Taxpayers face a multi-billion-pound bill as part of a plan to rescue the stricken mortgage lender Bradford & Bingley, it has emerged.

The biggest buy-to-let operator is on the verge of being nationalised by the Government as time runs out on attempts to find a private buyer.

B&B’s shares will be suspended when the stock market opens on Monday. By that point, the Government will either nationalise the bank or announce a deal to sell it.

Senior Treasury officials are working on a plan to take B&B into public ownership. That could be followed by a swift sale to a bank, with Santander of Spain – which also owns Abbey – seen as the favourite.

But unlike the sale of HBOS to Lloyds TSB two weeks ago, the deal will require public support, with many of the one million B&B mortgages left with the Treasury. As a result, taxpayers are likely to be left holding the mortgages most likely to default from the £40 billion portfolio.

This will increase the size of the national debt, though the ultimate bill for taxpayers is likely to be less, depending on how many B&B mortgage holders default.

Downing Street had called an emergency summit with banking chiefs to try to thrash out a solution. It is the second time in a fortnight that a major British bank has had to be rescued, fuelling fears for the fate of the banking system.

In a sign that the credit crisis is spreading through the wider economic system, the home furnishings retailer MFI also came close to collapse.

In the United States, politicians tried to reach agreement on a $700 billion (£380 billion) bail-out for American banks as insiders said that Wall Street shares could lose up to a third of their value if the talks failed. Financial Crisis: Bradford & Bingley Likely to Be Nationalised by Treasury >>> By Edmund Conway and Katherine Griffiths | September 28, 2008

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Saturday 27 September 2008

Ali Khan*: Muslim View on American Markets Meltdown

MIDDLE EAST ONLINE: The [sic] Wall Street has noticed that Shariah-compliant investments - which avoid speculative risk and debt-ridden greed- -have fared much better in these troubled markets. In the past few years, Shariah-compliant investments in Western markets have grown to more than half a trillion dollars, says Ali Khan.

Call it the consequences of irresponsible American invasions, call it the irrational exuberance of short sellers, call it the catastrophe of subprime lending, call it the mismanagement of leveraged products, blame it as you may, American markets are facing unprecedented meltdown and doomsayers see little promise in the federal bailout package. Ironically, the [sic] Wall Street has noticed that Shariah-compliant investments--which avoid speculative risk and debt-ridden greed--have fared much better in these troubled markets. In the past few years, Shariah-compliant investments in Western markets have grown to more than half a trillion dollars.

Islamic financing is attracting huge academic curiosity. Many experts participating in the 8th Harvard University Forum on Islamic Finance held this past April wondered if Islamic financing could have prevented the meltdown that American markets are facing primarily due to mortgage debt and mortgage-backed securities—now known as "toxic investments." This legal commentary highlights the two fundamental principles of Islamic financing that I presented at the Forum.

High Risk Investments

The Quran prohibits al-Maysir or speculative risk, warning the faithful to avoid games of chance in which the probability of loss in is much higher than the probability of gain (2:219). Shariah-compliant investments, therefore, avoid speculative risk, including interest rate options, naked equity options, futures, derivative and numerous leveraged products purportedly designed to hedge investments. Many of these financial products attract speculators in hopes of making quick money. When trusted fund managers, under institutional pressures to show profit, resort to speculative risk, hedge investments turn into suicidal strategies for financial destruction.

In pursuit of greed and thrill, straightforward investments in companies engaged in socially useful activity has become unattractive, even boring, because of their presumably lower rate of return—frequently a self-fulfilling prophecy. Billions of dollars are dumped into companies that promise huge profits but produce nothing. While Islam would allow risking investments in socially beneficial research projects, it prohibits investments in companies peddling alcohol, tobacco, pornography, debt, and weapons—products that undermine our health and safety.

Some investment strategies rampant in the markets are not only morally corrupt but socially harmful. Short sellers, for example, make money when companies collapse and close. Turning the conventional logic of investment on its head, short sellers wish companies to crash rather than prosper for they make most money when companies go bankrupt, workers and employees lose jobs, and pension funds evaporate through declining company stock. Such cynical investments, touted as useful forces that balance the market, are contrary to Islamic law. Muslim View on American Markets Meltdown >>> | September 27, 2008

*Ali Khan is Professor of Law at Washburn University in Topeka, Kansas.

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Bush Says Bail-out Will Be Passed

Photobucket
George W Bush courtesy of the BBC. What does his facial expression tell YOU?

BBC: President George W Bush has said that legislators will "rise to the occasion" and pass the proposed $700bn (£380bn) Wall Street rescue plan.

He said disagreements remained as "the proposal is big and the reason it's big is because it's a big problem".

Senate Majority Leader Harry Reid, a Democrat, said lawmakers would stay in session until a deal was reached.

But rebel Republicans remain unhappy at the plan to buy mortgage-backed assets from US banks.

However there were some positive signs later on Friday, when Democratic House of Representatives Speaker Nancy Pelosi said progress was being made on a financial rescue bill.

She said Congress was "back on track" in its efforts, and that lawmakers would continue to work over the weekend to reach agreement.

And Barney Frank, Massachusetts Democrat Representative and chairman of the House Financial Committee, said: "I am convinced that by Sunday we will have an agreement that people will understand on this, on this Bill". Bush Says Bail-out Will Be Passed >>> | September 26, 2008

Watch BBC video 1: President Bush on the ongoing bail-out talks >>>

Watch BBC video 2: Senators Harry Reid and Chris Dodd lay out their terms >>>

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Friday 26 September 2008

Futures Plunge on Bailout Impasse, Bank Collapse

REUTERS: NEW YORK (Reuters) - Stock index futures fell on Friday after congressional talks on a $700 billion financial sector bailout stalled and authorities seized the largest U.S. thrift, heightening worries about the fallout from the credit crisis.

Congressional leaders were set to try again on Friday to agree on a rescue plan, one of the costliest since the Great Depression, after talks descended into chaos overnight. Meanwhile, investors moved to pare back risk, with stock markets falling in Asia and in Europe.

In another worrying development, U.S. banking authorities closed Washington Mutual (WM.N: Quote, Profile, Research, Stock Buzz) in by far the largest failure of a U.S. bank. WaMu had about $307 billion of assets and $188 of deposits. Its banking assets were sold to JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz) for $1.9 billion.

"The negotiations over the bailout are sapping the enthusiasm that people could have for the market," said Rick Meckler, president of investment firm LibertyView Capital Management in New York. "I think with no agreement, it's going to be hard for the market to push ahead." Futures Plunge on Bailout Impasse, Bank Collapse >>> By Ellis Mnyandu | September 26, 2008

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Thursday 25 September 2008

Financial Crisis: Republicans and Democrats Agree £380 Billion Bail-out Deal

THE TELEGRAPH: A £380 billion deal to save the world's economy has been struck in the US after Republicans and Democrats reached a "fundamental agreement" to bolster America's banks.

Standing alongside his Republican counterpart, Senator Chris Dodd, the Democratic chairman of the Senate Banking Committee, said a deal on a set of principles to be voted on by Congress would be to be passed within the "next few days".

The bill represents a dramatic attempt to prevent the global economy plunging into a deep recession.

The outline deal came as President George W. Bush, the two candidates vying to replace him and congressional leaders were preparing a crisis summit at the White House to hammer out final details.

Representative Barney Frank, Democratic chairman of the House Financial Services Committee, said he would tell Mr Bush there "really is not much of a deadlock to break" because a skeleton package had been agreed by both parties in Congress.

Dana Perino, Mr Bush's press secretary, said that "significant progress" had been made.

"We have a framework that we can try to close on and we hope that we can get it done quickly."

She would not, however, outline specifics about provisions the Bush administration saw as deal breakers. "We have made a few steps forward and they've come a few steps our way. So we're reaching a consensus and we're going to try to drive that to a conclusion today."

The summit came after Mr Bush issued a portentous warning that "America could slip into a final panic", triggering a deep recession in which "millions of Americans could lose their jobs" without "immediate action" by Congress.

Mr Bush's proposed bailout plan involved the federal government buying up the assets of tottering financial companies, an intervention designed to keep credit markets open and heading off economic disaster on the scale of the Great Depression of the 1930s. Financial Crisis: Republicans and Democrats Agree £380 Billion Bail-out Deal >>> By Toby Harnden in Washington | September 25, 2008

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Irish Economy Sinks into Recession

YAHOO! NEWS (UK & IRELAND): The Republic of Ireland has become the first European Union economy to be pushed into recession by the credit crunch.

Irish gross domestic product (GDP) shrank by 0.5% in the second quarter compared with the previous three-month period, according to data from the Central Statistics Office.

That followed a contraction of 0.3% in the first three months of the year.

The technical definition of a recession is two or more successive quarters in which the economy shrinks.

Earlier this month, the European Commission predicted that the UK, Germany and Spain would also fall into recession before the year is out.

Dubbed the Celtic Tiger during massive growth in the late 1990s, the Irish business sector now faces its most difficult period since high unemployment and emigration hit the 1980s.

The Department of Finance pointed to the crumbling property market and the international credit crunch for the alarming figures.

A Government spokesman said: "As expected, lower levels of new house building had a major restraining influence on growth in the second quarter, as is evident from the very weak investment figures.

"Other factors at work include higher commodity prices, global financial market problems, weak demand in our major trading partners and adverse exchange rate movements." [Source: YAHOO! NEWS (UK & IRELAND)] Sky News | September 25, 2008

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More Sharia-compliant Investment Companies than Conventional Ones in Kuwait

ARAB TIMES: KUWAIT, (KUNA): Islamic investment companies have surpassed conventional institutions, with 48 Sharia-compliant investment companies up to the end of July compared to 45 conventional ones. According to a KUNA analysis of statistics published by the Central Bank of Kuwait, however, the volume of assets managed by Islamic companies still remained less than that run by conventional companies. Total assets held by conventional companies came to KD 10.6 billion at the end of July compared to KD 7.9 billion held by Islamic ones. Nevertheless, there is a noticeable growth in assets of Islamic investment companies since January by 18.7 percent compared to the 14 percent growth rate registered by conventional companies during the same period.

As for assets of conventional companies, they were divided into credit facilities to residents at KD one billion, domestic investments at KD 3.1 billion, as well as KD 145 million in non-financial investments. Foreign assets came to KD 4.6 billion, cash at KD 8.7 million, and other assets came to KD 1.2 billion. Assets of Sharia-compliant investment companies came to a total of KD 7.9 billion of which financial investment accounted for KD 2.8 billion, foreign assets at KD 1.9 billion, as well as client financing operations at KD 947 million.

Meanwhile, the Chairman of Al-Madina Real Estate Development Company — a subsidiary of Al-Madina for Finance and Investment Company — announced that the company is proceeding with the implementation of its marketing strategy, which relies on real estate investment in the domestic market by seeking to seize promising investment opportunities, where the company acquired three residential towers in Abu Dhabi, in the UAE, and will be marketed in an exhibition. In another development, Global Investment House has signed a syndication of a $410 million three-year term loan backing its acquisition of a 20% stake in National Bank of Umm Quwain (NBQ). The loan was launched via arranging banks BNP Paribas and WestLB. Global Investment House will contribute with a 25% stake of the capital increase which will reach $650 million. [Source: ARAB TIMES] | September 24, 2008

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Blue Ocean Partners with BLME

MARKETWATCH: Bank of London and The Middle East provides US$25 million facility

DUBLIN, Ireland & LONDON, Sep 25, 2008 (BUSINESS WIRE) -- Blue Ocean Wireless Ltd ("BOW"), an Irish company delivering GSM communication capability for the merchant maritime sector, today announced that it has partnered with Bank of London and The Middle East plc (BLME), the London based wholesale, Sharia'a compliant bank, to provide asset financing for the continued roll out of its global GSM maritime service.

BOW was founded in March 2007 by Claret Capital, the Irish private equity firm. BOW has successfully established the first GSM service for the global maritime industry. BOW launched and completed its first full year of installations without recourse to third party financing - BOW has no debt. Since foundation, Claret Capital has spearheaded a series of fundraisings for BOW which contribute to a current valuation of over US$87 million.

Claret Capital is BOW's largest shareholder. Other shareholders include NTT DOCOMO, Inc. the world's leading mobile communications company, Smart Communications, Inc, the Philippines mobile phone company, Altobridge, the Irish remote communications company, and Bank of Scotland (Ireland), a wholly owned subsidiary of HBOS Plc.

BOW has now partnered with BLME which provides access to an asset finance facility of US$25 million to support its growth targets. BOW is also among the first Irish companies to avail of Islamic (Sharia'a compliant) financing. Blue Ocean Partners with BLME >>> | September 25, 2008

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Bush Warns of Dire Economic Consequences if the Bailout Plan Is Rejected by Congress


THE TELEGRAPH: President George W. Bush summoned Barack Obama and John McCain to the White House as he warned a failure by Congress to agree to a $700 billion bailout plan would lead to a "long and painful recession"

In a prime-time television address, Mr Bush said America's "entire economy is in danger" and implored Democrats and Republicans on Capitol Hill to act swiftly and vote for the package. "It should be enacted as soon as possible," he said.

He stressed: "Without immediate action by Congress, American [sic] could slip into a financial panic and a distressing scenario would unfold."

Mr Bush warned that "the market is not functioning properly" and that with a "widespread loss of confidence" major business sectors were at risk. More banks could fail, triggering a recession, pushing down houses [sic] prices and "millions of Americans could lose their jobs". He added: "We must not let this happen."

In the long run, he said, Americans had good reason to be confident in their country's economic strength. "Despite corrections in the marketplace and instances of abuse, democratic capitalism is the best system ever devised."

Shortly after the speech, Representative Barney Frank, chairman of the House of Representatives Financial Services Committee, said that the majority Democrats had reached an agreement on the financial bailout plan and there would therefore be enough votes to pass it and send it to Mr Bush.

"We now have between House and Senate Democrats an agreement on what we think should be in the bill, and we have a meeting scheduled at 10 am tomorrow to meet with the Republicans."

Mr Bush explicitly endorsed several of the changes that have been demanded in recent days from the right and left. But he warned that he would draw the line at regulations he determined would hamper economic growth.

"It should be enacted as soon as possible," the president said.

His move was aimed at explaining the package to the American public. Bush said the goal is to help the government buy up troubled assets so that credit can start flowing again and the economy will rebound.

He said the rescue is aimed at helping the country, not individual companies. Financial Crisis: George W Bush to Meet John McCain and Barack Obama on Economy >>> By Toby Harnden in Washington | September 25, 2008

THE TELEGRAPH:
Dollar Tumbles as Bailout Hangs in the Balance: The dollar slumped against the pound and the euro after President George W Bush's warning of the possibility of a "long and painful recession" unless Congress supports a bail-out of Wall Street. >>> By Angela Monaghan | September 26, 2008

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Wednesday 24 September 2008

Unadulterated Greed!

THE TELEGRAPH: The two most senior figures in the Church of England have launched outspoken attacks on the excesses of capitalism which they claim have led to the current global financial crisis.

The Archbishop of York, Dr John Sentamu, condemned the financial traders who made millions by driving down the share price of leading banks as "bank robbers and asset strippers".

In a powerful speech to City bankers on the effects of the credit crisis on Wednesday, he denounced the "Alice in Wonderland" world of global finance where short-sellers profited by laying bets that shares in HBOS would fall in price.

Meanwhile the Archbishop of Canterbury, Dr Rowan Williams, warned in a magazine article that modern devotion to the free market is a form of idolatry and that Karl Marx was right in his analysis of the power of "unbridled capitalism".

The pair's attacks came following a tumultuous week in which four major financial institutions went bust or were taken over, triggering multi-billion pound government rescue plans to steady the markets, after traders targeted banks that had been weakened by exposure to unrecoverable mortgage debts and a reduced ability to borrow money.

The billionaire Wall Street hedge fund manager John Paulson was one of those who made money by betting that the share price of HBOS, Britain's largest mortgage lender, would fall. The activities of such short-sellers - now temporarily banned - led to a collapse in the bank's shares last week and it had to be bought out by Lloyds TSB.

Speaking to the Worshipful Company of International Bankers, Dr Sentamu said: "Those who made £190million deliberately underselling the shares of HBOS, in spite of its very strong capital base, and drove it into the bosom of Lloyds TSB, are clearly bank robbers and asset strippers.

"We find ourselves in a market system which seems to have taken its rules of trade from Alice in Wonderland, where the share value of a bank is no longer dependent on the strength of its performance but rather on the willingness of the Government to bail it out, or rather on whether the Government has announced its intentions so to do." Archbishops of Canterbury and York Blame Capitalism Excesses for Financial Crisis >>> By Martin Beckford, Religious Affairs Correspondent | September 24, 2008

YAHOO! NEWS (UK & IRELAND):
Church Accused of Short-selling >>> PA | September 25, 2008

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Ben Bernanke Demands Bail-out Action

Action by Congress is urgently required to stabilize the situation and avert what otherwise could be very serious consequences for our financial markets and for our economy - Ben Bernanke, Chairman, Federal Reserve

BBC: The chairman of the US Federal Reserve has urged politicians to "act quickly" to support the proposed $700bn (£378bn) bail-out of the financial markets.

The US economy risked "very serious consequences" if measures were not taken, Ben Bernanke added.

Mr Bernanke said Congress must "address the grave threats to financial stability" which were being faced.

On Tuesday politicians expressed strong scepticism about the bail-out following a five-hour Senate hearing on the plan.

’Work together’

Treasury Secretary Henry Paulson had told already the banking panel that delaying the bail-out would put the entire US economy at risk.

The White House has called on Republicans and Democrats to work together to approve the plan, under which a federal fund could buy bad debt from financial institutions with "significant operations in the US".

The fund would aim to sell off these mortgage-related debts in the future when, the Treasury says, their value might have risen.

But congressmen from both sides said they wanted assurances that the plan would benefit ordinary American home-owners as well as Wall Street.

Some have gone further, calling the plan a potential waste of public money. Bernanke Demands Bail-out Action >>> | September 24, 2008

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Sarkozy Calls for Global Summit to Overhaul Financial System

DEUTSCHE WELLE: French President Sarkozy called Tuesday for a summit to tackle the global financial crisis and urged world leaders to draw lessons from capitalist excesses in a speech before the UN General Assembly.

In a hard-hitting speech before the UN General Assembly in New York on Tuesday, Sept 23, French President Nicolas Sarkozy demanded that those responsible for the global financial turbulence be punished and called for a "regulated capitalism."

"Today, millions of people across the world fear for their savings, for their apartment, for the funds they have put in banks. It is our duty to give them clear answers," the French president, who chairs the EU's presidency, said. "Who is responsible for this disaster? May those who are responsible be punished and held accountable," he said.

In his first public statements on the financial crisis which has rattled world markets and sparked a $700 billion US rescue package, Sarkozy urged major powers to devise a new form of regulated market economics that would prevent the excesses behind the current credit crisis which felled investment bank Lehman Brothers. Sarkozy Calls for Global Summit to Overhaul Financial System >>> | September 23, 2008

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Recession Bites into Long French Lunch

THE GUARDIAN: ·3,000 restaurants and bars go bust in three months 
·Starters and wine out, baguettes and burgers in

It is seen as the mark of civilised eating, distinguishing well-fed French workers from the English who wolf prawn sandwiches at their desks. But France's tradition of the three-course restaurant lunch is in danger of being killed off by the economic crisis.

Around 3,000 traditional French restaurants, cafes and bars went bust in the first three months of 2008 and unions predict a further rush of closures as people worry about making ends meet. The number of French restaurants going bankrupt rose by 25% from last year, and cafes forced to close were up by 56%.

Le Figaro's renowned restaurant critic François Simon said yesterday that French consumers' frugality had changed national eating habits and forced restaurant owners to the brink. Diners were now skipping the traditional aperitif, avoiding starters, drinking tap water, passing on wine and coffee and - at most - sharing a pudding.

Even the city's smartest restaurants were getting impatient with smaller orders. In one restaurant near Paris's Gare de Lyon, he reported, two couples were asked to leave by a desperate restaurant owner because they would not order starters. The restaurant chain Hippopotamus was now running loyalty deals and special-offer hamburgers, which had become more popular than French steak dishes. Office workers were increasingly buying take-away baguettes and supermarket lunches.

Making ends meet with low salaries and rising food prices has become a national obsession as France's economy continues to be sluggish. Regular TV reports describe the desperation of people forced to eat cheap tinned vegetables or forage in bins at markets.

The restaurant sector has seen the third highest number of bankruptcies in France this year after the construction and building trades, according to the credit insurance group Euler Hermes SFAC. Au revoir to Long Lunch as French Tighten Belts >>> By Angelique Chrisafis in Paris

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Buffett Invests in Goldman Sachs

THE BOSTON GLOBE: Warren Buffett, America's most famous investor and one of the world's richest men, said yesterday he would invest $5 billion in Goldman Sachs in a move that could bolster confidence in the financial markets.

Until now, Buffett, who has navigated the stock market with legendary prowess, has largely refrained from investing in the stricken financial industry, saying repeatedly that things could get worse.

Thousands of people on and off Wall Street follow Buffett's moves, so his decision to invest in Goldman immediately heartened investors. After falling nearly 1.5 percent during the day, the Standard & Poor's 500 index erased its loss in after-hours trading on news of the investment.

Buffett's conglomerate, Berkshire Hathaway, unveiled the move only days after Goldman, long the premier investment house on Wall Street, embarked on a radical plan to transform itself into a traditional bank in order to ensure its survival. Goldman, which examined various options over the past week as its shares tumbled and some clients abandoned the firm, said it would sell at least $2.5 billion of common stock to the public.

Since the credit crisis flared more than a year ago, Buffett had stayed his hand even as other investors poured money into ailing American financial companies like Citigroup and Merrill Lynch, only to see their investments wither.

Such wariness is a hallmark of Buffett's investing style, and many on Wall Street have wondered when he might jump in.
Buffett, in the statement, called Goldman Sachs an exceptional institution.

"It has an unrivaled global franchise," Buffett said, "a proven and deep management team and the intellectual and financial capital to continue its track record of outperformance."

Berkshire Hathaway will receive perpetual preferred shares in Goldman, which will pay a 10 percent annual dividend, or $500 million a year. Buffett Invests in Goldman Sachs >>> By Ben White | New York Times News Service | September 24, 2008

LE FIGARO:
Warren Buffett investit dans Goldman Sachs : Le milliardaire américain va investir 5 milliards de dollars dans la banque d'affaires. Cette opération devrait ramener la confiance chez les investisseurs.

L'oracle d'Omaha apporte l'espoir sur les marchés financiers. Le milliardaire américain Warren Buffett a en effet annoncé mardi soir, après la clôture de Wall Street, qu'il va investir 5 milliards de dollars dans Goldman Sachs. Il estime que la banque d'affaires américaine est une «institution exceptionnelle qui a une présence mondiale sans rivale, une équipe de direction fournie et aguerrie, et le capital financier et intellectuel pour continuer à surperformer comme par le passé». >>>
Perrine Créquy | 24.09.2008

NZZ Online:
Buffett investiert fünf Milliarden Dollar in Goldman Sachs: Vertrauenssignal für gebeutelten Finanzmarkt

Der Multimilliardär Warren Buffett steigt mit mindestens fünf Milliarden Dollar bei der amerikanischen Investmentbank Goldman Sachs ein. Das Engagement wird als ermutigende Vertrauensbekundung für den gebeutelten Finanzmarkt in den USA eingeschätzt. >>>
| 24. September 2008

THE TELEGRAPH:
Warren Buffett Compares US Bail-out Decision to Action over Pearl Harbor: Warren Buffett, the US billionaire buying a $5bn stake in Goldman Sachs, has said recent economic turmoil "will look like nirvana" if senators do not approve a $700bn bail-out plan soon. >>> By Rowena Mason | September 24, 2008

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Tuesday 23 September 2008

Deutsche Bank to Launch Sharia Hedge Fund Platform

THE GUARDIAN: LONDON, (Reuters) - Deutsche Bank AG's prime brokerage business is preparing to launch a sharia-compliant hedge fund platform within the next month, as part of its Middle East expansion plans, a senior official said.

Deutsche Bank will expand an existing service on a selective basis, regional head for Middle East Structuring Geert Bossuyt told Reuters, and the platform -- or range of financial products -- will offer techniques for hedge funds to adjust to Islamic investment rules.

"It is a bit like the case of the chicken and the egg, you will never have demand if there is no offer. So Deutsche Bank, and others, offer product," he said. Deutsche Bank to Launch Sharia Hedge Fund Platform >>> By Cecilia Valente | September 23, 2008

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Sarkozy veut «construire 
un capitalisme régulé»

LE FIGARO: A la tribune de l'ONU, le chef de l'Etat a proposé mardi une réunion des dirigeants mondiaux pour tirer les leçons de la crise financière, ainsi qu'un espace économique commun entre UE et Russie.

Nicolas Sarkozy veut remettre de la politique dans l'économie. Comme on s'y attendait, le président en exercice de l'Union européenne a livré mardi, à la tribune de l'ONU, un plaidoyer pour une meilleure régulation du capitalisme.

«Ma conviction, c'est que le devoir des chefs d'Etat et de gouvernement des pays les plus directement concernés est de se réunir avant la fin de l'année pour réfléchir ensemble aux leçons à tirer de la crise financière la plus grave qu'ait connue le monde depuis celle des années 30», a lancé le chef de l'Etat, qui s'exprimait au nom des 27 pays de l'Union européenne. Avant d'en appeler à ses homologues : «Apprenons à gérer collectivement les crises les plus aiguës que nul, pas même les plus puissants d'entre nous, ne peut résoudre tout seul».

Cette proposition d'un sommet mondial pour réorganiser l'économie mondiale n'est pas sans rappeler les accords de Bretton Woods, qui avaient mis en place en 1944 le système monétaire international, pensé pour éviter le retour d'une crise semblable à celle des années 1930. Reste à savoir si l'initiative du chef de l'Etat sera entendue. Sarkozy veut «construire
un capitalisme régulé» >>> Samuel Laurent (lefigaro.fr) avec AFP, AP | 23.09.2008

LE FIGARO:
Supplique pour le sauvetage des banques aux Etats-Unis >>> Perrine Créquy, avec AFP | 23.09.2008

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America Cries for Financial Help: Germany Cocks a Snook

SPIEGELONLINE INTERNATIONAL: The US government is buying bad debt for $700 billion. Now Washington is asking other countries to jump in and help, too, but the Germans are bowing out. Believing that the rescue package sends the wrong signal, experts from the country's leading economics think tanks argue it's the right call.

It's not a call for assistance; it's a scream for help. US Treasury Secretary Henry Paulson is asking other countries to help buy up bad US debt. The US government is putting up $700 billion in taxpayer money in the hopes that the measure might restore stability in the financial system. Some countries are planning to help. But the German government has answered this call quickly and clearly: no.

Economics experts think that's the right response. As they see it, in the long run, those responsible for the crisis -- who have been cashed out with high salaries and bonuses for years -- will not be penalized for billions "but will be let off the hook like everyone else," says Carsten Meier of the Kiel Institute for the World Economy (IfW). According to Meier, by injecting capital into the market, the US government is putting everyone who speculated and lost back on their feet and thereby standing in the way of a market cleanup.

Paulson has stated that the US government will pay a fair price for the bad debt, which Meier sees as sending "precisely the wrong signal," adding that "people shouldn't be rewarded for taking such high risks." Meier also finds Germany's decision to sit out any bailout operation to be the right move. "The financial crisis is primarily a problem in America," Meier says. As he sees it, the fact that Germany and Europe are far less affected that the US justifies European reluctance. "The stability of the German banking system is not in danger," Meier points out as he explains why he believes Europe shouldn't provide any funds. "The world shouldn't have to bear the burden for America's lapses." 'The World Shouldn't Have to Bear the Burden for America's Lapses' >>> By Corinna Kreiler in Hamburg | September 23, 2008

BBC:
Paulson Eyes Rescue Plan Backing: US Treasury Secretary Henry Paulson has urged a key Congressional hearing not to delay a $700bn (£382bn) bail-out of the US banking system.

Mr Paulson told the Senate Banking Committee that the personal savings of US citizens are at risk if the rescue plan is not implemented.

The Treasury wants unlimited authority to buy back the bad debt that is clogging the financial markets.

Fed chairman Ben Bernanke has backed him by saying urgent action is needed.
>>>
| September 23, 2008

Watch BBC video: Henry Paulson on the plan to rescue the US economy >>>

BBC:
What Would Financial Armageddon Look Like? >>> By Anthony Reuben, Business reporter, BBC News | September 23, 2008

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Ahmadinejad Sacks Central Bank Governor Who Warned of Inflation

THE TELEGRAPH: Iran's radical president Mahmoud Ahmadinejad has eliminated one of his strongest opponents within the state system by sacking the governor of the country's central bank.

The move leaves the Iranian leader free to bolster the populist spending programmes that have been a cornerstone of his appeal but have stoked inflationary pressures in the oil rich nation.

Tahmasb Mazaheri had served as leader of the state bank only since last September. But in that time he had incurred the wrath of the president by publicly warning that government economic plans would lead to hyper-inflation and revealing that he was not allowed to raise interest rates to desireable levels.

Behind closed doors he was believed to have repeatedly clashed with the government over its spending plans.

The central bank's secretary general, Mahmoud Bahmani was appointed acting governor but there are fears an outsider could become the third leader of the institution in the four years since the former paramilitary took power.

A wider assault on professional government institutions has been launched by the Iranian president, a dedicated defender of the religious principles of the Islamic revolution. Last week Tehran announced that it was transferring responsibility for patrolling the Gulf out of the hands of the country's navy. The cleric-controlled Iranian Revolutionary Guard will in future patrol the world's most sensitive waterway.

In advance of next year's presidential elections Mr Ahmadinejad injected enormous amounts of oil money into the economy in an attempt to help Iranians deal with the rising prices of basic goods. Ahmadinejad Sacks Central Bank Governor Who Warned of Inflation >>> By Damien McElroy | September 22, 2008

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Retirees Filling the Front Line in Market Fears

THE TELEGRAPH: Older Americans with investments are among the hardest hit by the turmoil in the financial markets and have the least opportunity to recover.

As companies have switched from fixed pensions to 401(k) accounts, retirees risk losing big chunks of their wealth and income in a single day’s trading, as many have in the last month.

“There’s a terrified older population out there,” said Alicia H. Munnell, director of the Center for Retirement Research at Boston College. “If you’re 45 and the market goes down, it bothers you, but it comes back. But if you’re retired or about to retire, you might have to sell your assets before they have a chance to recover. And people don’t have the luxury of being in bonds because they don’t yield enough for how long we live.”

Today’s retirees have less money in savings, longer life expectancies and greater exposure to market risk than any retirees since World War II. Even before the last week of turmoil, 39 percent of retirees said they expected to outlive their savings, up from 29 percent in 2007, according to a survey by the Employee Benefit Research Institute, an industry-sponsored group in Washington.

“This really highlights the new world of retirement,” said Richard Johnson, a principal research associate at the Urban Institute in Washington. “It’s a much riskier world for retirees, because people don’t have defined-benefit plans. They have pots of money and they have to worry about making it last.” Retirees Filling the Front Line in Market Fears >>> By John Leland and Louis Uchitelle | September 22, 2008

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Fury at $2.5bn Lehman Bonus

TIMESONLINE: Nomura and Barclays table bids today for US giant’s London operation as bank’s administrator likens collapse to Enron

STAFF at Lehman’s New York office who helped to cause the world’s biggest corporate bankruptcy are to share in a $2.5 billion bonanza.

The bonus, which has been described by London staff as a “scandal” has been pledged by Barclays Capital, the British-based bank that last week acquired Lehman’s American operation and took on 10,000 staff.

The $2.5 billion (£1.4 billion) pot, which has been ring-fenced as part of the acquisition, has caused huge resentment among the 5,000 staff in the firm’s European and Middle Eastern operations who are not guaranteed to be paid after this month.

There are, however, hopes that half the jobs in Lehman’s Canary Wharf office could be saved today by either Barclays or Nomura. Bids are being submitted for its UK equities and investment-banking business. Fury at $2.5bn Lehman Bonus >>> By John Waples and Danny Fortson | Septemebr 21, 2008

MAIL Online:
FBI Launches Investigation into Collapsed Finance Giants: The FBI is investigating four major U.S. financial institutions whose collapse has forced George Bush's administration to launch a $700 billion bail-out.

Federal investigators are said to be looking at potential fraud by mortgage finance giants Fannie Mae and Freddie Mac, investment bankers Lehman Brothers and insurers AIG.
The probe, still in its opening stages, will focus on the financial institutions and their top managers.
>>>
| September 24, 2008

LE FIGARO:
Le FBI enquête sur les géants de la finance : L'agence gouvernementale américaine recherche de possibles fraudes, notamment dans les sociétés Fannie Mae, Freddie Mac, AIG ou encore Lehman Brothers. >>> J.B. (lefigaro.fr) Avec AP et AFP | 24.09.2008

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Goldman Sachs Brings to an End an Era in Investment Banking

THE TELEGRAPH: 'It's the end of an era. Wall Street has changed forever.” It may have been Paul Mortimer-Lee, research analyst at BNP Paribas, who spoke the words yesterday but they might have been anybody’s.

Across newswires and television channels, hundreds of commentators and bankers were making the same utterance.

Goldman Sachs and Morgan Stanley, the last venerable names of investment banking, on Monday shocked the markets by ditching their free-wheeling broker-dealer status to become regulated banks, bringing the curtain down on 75 years of Wall Street history.

Wall Street was born out of the depression era Glass-Steagall legislation of 1933 that separated investment and commercial banking. Great names such as Salomon Brothers, Paine Webber, Smith Barney and Kidder Peabody built it into the financial powerhouse it now is.

Most investment banks have since merged or been taken over as Glass-Steagall was gradually eroded through the 1990s, but the giants remained. Until now.

With Lehman Brothers dead, Merrill Lynch sold and Bear Stearns rescued, the “Masters of the Universe” tag now looks like little more than a tombstone engraving. Goldman and Morgan Stanley, by changing status, have etched their names on, too. “Some colleagues think this it is the death of Wall Street,” Mr Mortimer-Lee said.

“They remember when there were 45 broker dealers and are mourning it as the passing of an era.”

For Mr Mortimer-Lee, there is an appropriate symmetry to it all. “It is ironic that the broker dealers were born as a result of the bank and broker-dealer separation that was deemed necessary as a result of the 1930s crisis, and now broker-dealers and banks get put back together as a result of the nearest thing since to a 1930s-style crisis.” Goldman Sachs Brings to an End an Era in Investment Banking >>> By Philip Aldrick | September 22, 2008

SPIEGELONLINE INTERNATIONAL:
'Bad News for the Ferrari Salesmen of the World': The US investment banks Goldman Sachs and Morgan Stanley have announced that they will become full-service banks. Some German commentators see it as the end of the age of big gamblers. Others aren't so sure.
Right when everyone thought the roller-coaster ride of the US financial crisis was over, along came another jarring twist. Since 1933, when the Glass-Steagall Act was passed, US banks have been segregated into investment banks and retail banks. While retail banks plodded along using depositor capital, Wall Street investment banks could take enormous risks -- with enormous payoffs.

And so it was for 75 years until Sunday night's announcement that Morgan Stanley and Goldman Sachs -- America's last two independent investment banks -- had decided to switch sides and transform themselves into retail banks. In doing so, they have sounded the death knell for the Glass-Steagall structure and -- for now, perhaps -- for a high-risk, high-roller era.
In their new incarnations, Morgan Stanley and Goldman Sachs will offer consumer-banking services and gain permanent access to the discount window of the Federal Reserve. At the same time, they will be subject to the much more stringent regulations of the Fed rather than just those of the Securities and Exchange Commission. In effect, they will need to have more capital on hand relative to the amount they wish to borrow. That means less risk to play with. >>>
Rachel Nolan | September 23, 2008

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The End of the Capitalist World as We Have Known It?

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THE TELEGRAPH: “This may prove to be the dollar’s epochal moment – the moment historians look back at as its major turning point.”

Whether or not tomorrow’s accounts of today’s turmoil prove David Owen of Dresdner Kleinwort right; whether or not this is the beginning of the end of the dollar’s pre-eminence in the world’s central banks and foreign exchanges, the economic landscape has undoubtedly changed forever.

The US taxpayer bail-out of America’s banking sector is an event whose significance will reverberate for many years. What it means for free markets, for the way Western economies are run, for the prosperity of the world economy, must remain to be seen.

But as investors scrambled to make sense of last week’s events, already one conclusion was all but irrefutable – the US dollar will have to take another major fall.

The dollar rally that began in July and pushed the pound’s value against the greenback significantly lower has come to an abrupt end as markets face up to the fact that the currency will have to absorb the effects of a sudden shocking increase in America’s budget deficit.

When Treasury Secretary Hank Paulson announced that the world’s biggest economy was about to embark on the world’s biggest bail-out for its financial sector, the first concern economists had was about the long-term prospects for the nation’s finances and its currency.

Might the dollar now be vulnerable to a run? In the longer term, might this signal the beginning of the end for the dollar’s status as the world’s reserve currency? US Dollar Set to Be Major Casualty of Hank Paulson's Bailout >>> By Edmund Conway | September 22, 2008

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