US, Global Markets: What's Next?
Think Progress: White House Defends Bailout Of Wall Street Instead Of Main Street
During today's news briefing, reporters questioned White House Press Secretary Dana Perino on the Fed's actions, noting that the White House has repeatedly refused to extend similar assistance to homeowners facing foreclosure. Perino replied that help to homeowners -- a "boost of liquidity" -- would come "in the form of a stimulus package and a tax rebate."
The average rebate check will amount to about $600 for single people and $1,670 for middle income families. Compare this figure to the nationwide median mortgage payment, which stood at $1,566 in September. Or to the average increase in subprime mortgage payments in early 2007, which was $320 per month.
These checks obviously won't help Americans stave off foreclosure -- a frightening reality facing an increasing number of people. Foreclosure rates skyrocketed 60 percent last month from February 2007, and Americans own less equity in their homes than they have since World War II.
Read more and watch the video of Perino's comments here.
New York Times: Fears That Bear Sterns Downfall May Spread
The cash squeeze that brought Bear Stearns to its knees is fanning fears that other investment banks might be vulnerable to the crisis of confidence gripping Wall Street.
Investors are bracing for another volatile week in the markets as bankers and policy makers deal with the fallout from their bid to rescue Bear Stearns.
For now, the prospect of a new wave of consolidation in the beleaguered financial services industry seems remote. That is because would-be acquirers and everyday investors alike have lost faith in the values that Wall Street firms are placing on their own assets.
Of particular concern are the so-called marks placed on mortgage-linked investments like those that undid Bear Stearns, prompting a run on the firm that led the Federal Reserve and JPMorgan Chase to throw Bear Stearns a financial lifeline last week.
James E. Cayne, the chairman of Bear Stearns, mused eight years ago that he might consider selling the 85-year-old bank for a lofty price of four times what it values itself on its books. But now such a notion seems absurd -- and not just for Bear Stearns.
The unhappy experience of Bear Stearns proves that it is a lack of confidence, not capital, that ultimately topples even the savviest financial institutions.
"Once you have a run on the bank you are in a death spiral and your assets become worthless," said David Trone, a brokerage analyst at Fox Pitt Kelton.
In all-day meetings over the weekend, Alan D. Schwartz, the chief executive of Bear Stearns, met with his top executives at the firm's Madison Avenue headquarters, trying desperately to persuade skeptical potential suitors that the firm was worth buying.
But the market had already passed a harsh judgment on Bear Stearns. On Friday, its stock plunged 47 percent, closing at $30. At that price, its shares were trading at a gaping 62 percent discount to the $80 book value that the firm has reported, reflecting the broad view that the fallout from the credit crisis had permanently devastated Bear Stearns's core mortgage operations.
New York Times: Dow Ends Flat After Day Of Gyrations
A day that loomed darkly on Wall Street ended with only a modest decline in the overall market and the Dow Jones industrials in an unlikely place: positive territory.
A floor trader at the Hong Kong Stock Exchange on Monday. More Photos »
The Dow finished up 21 points after gyrating wildly through much of the session, from a loss of almost 200 points to a gain of 100, in one of the most volatile trading days in months.
But shares of most financial firms plummeted as one of Wall Street's most storied banks, Bear Stearns, lay on its deathbed and central bankers scrambled to stave off a devastating crisis of confidence in the financial world.
AP: Fed Primed To Aggressively Cut Key Interest Rate On Tuesday
The Federal Reserve is primed to aggressively cut a key interest rate even lower on Tuesday, racing to contain spreading financial fires that threaten an economic meltdown...
..."The Fed is on high alert -- something you don't see but once every quarter century; may be, in this case, since the Great Depression. This is a very unusual period," said Mark Zandi, chief economist at Moody's Economy.com...
...To limit the damage, Bernanke and his colleagues may ratchet down a key interest rate, now at 3 percent, by as much as a full percentage point, to 2 percent, which would put that rate at the lowest it has been since late 2004. Because that rate affects a wide range of rates charged to millions of consumer and businesses, it is the Fed's most potent tool for reviving economic activity.
Reuters: Deepening Economic Slump Envelops Factory Sector
A spreading economic slowdown seeped into U.S. factory activity in February and March as waning demand more than offset the export benefits of a cheaper dollar, a series of reports on Monday showed.
A Federal Reserve report on industrial output showed that factories were running at their slowest rate in more than two years during February while a key gauge of factory business in the Northeastern U.S. slumped to a record low in March.
Taken together, the reports reinforced concern that the world's largest economy stalled during the first quarter and was in an actual downturn, though Bush administration officials refuse to concede a recession has started.
AP: After Bear Sterns Rescue, Who's Next?
With a deal in place to save Bear Stearns from bankruptcy, the company's shares traded above the offer price Monday even as investors began turning a critical eye to other investment banks amid worries about how far the credit contagion could spread...
...With Bear Stearns seemingly gone, investors pondered who might be next. Lehman Brothers Holding Inc. stock fell more than 34 percent Monday, following a 15 percent drop on Friday amid concerns it might be facing similar liquidity issues. Lehman Chief Executive Richard Fuld denied Monday that the firm was having such problems.
Reuters: Banks Face A "New World Order" After Bear Sterns Collapse: Report
Financial firms face a "new world order" after a weekend fire sale of Bear Stearns and the Federal Reserve's first emergency weekend meeting since 1979, research firm CreditSights said in a report on Monday.
More industry consolidation and acquisitions may follow after JPMorgan Chase & Co (JPM.N) on Sunday said it was buying Bear Stearns (BSC.N) for $236 million, or $2 a share, a deep discount from the $30 price on Friday and record share price of about $172 last year...
...In the event of future consolidation, potential acquirers identified by CreditSights include JPMorganChase, Wells Fargo, US Bancorp, Goldman Sachs and Bank of America (BAC.N), once it works through its recent agreement to acquire Countrywide Financial Corp, (CFC.N) the largest U.S. mortgage lender.