Bush promises deal on US bank rescue as markets scream distress

AFP on Yahoo ^ | 9/26/08 | AFP

[NormsRevenge]

NEW YORK (AFP) - The US economy is in big trouble but policymakers agree on the need for a rescue, President George W. Bush reassured Friday as deadlock on a vast bank bailout plan slammed stocks and international bank lending.

"We've got a big problem...we need a rescue plan," Bush said minutes after Wall Street shares dropped in line with a global trend and central banks again injected tens of billions of dollars to avert seizure on interbank lending markets.

After a rescue for US savings giant Washington Mutual in the biggest-ever US banking failure, shock waves hit European financial markets, with analysts describing interbank lending stresses as "apocalyptical" and "extreme."

They referred to "money market meltdown" and "major systemic risk" in short-term money markets, the heartbeat of banking.

Belgian-Dutch bank and insurance group Fortis bank announced an emergency asset sale to raise 5.0-10 billion euros (up to 14 billion dollars) and its shares closed with a loss of close to 21 percent.

The company late Friday said it had replaced its chief executive, Herman Verwilst, with Filip Dierckx, currently head of the banking division, saying it had confidence in his ability to "restore trust and confidence in the company."

Cross-party talks on the 700-billion-dollar rescue for debt-laden US banks were being resumed Friday, and Bush said: "We are going to get a package passed...We will rise to the occasion, Republicans and Democrats will come together."

Acknowledging disagreements, he insisted "there is no disagreement that something substantial has to be done."

[DRey]

A market correction is in order. Let it correct itself and let’s move on.

[C19fan]

A market correction is in order. Let it correct itself and let’s move on.

A lot of people said that in 1929. The rest is history.

[Tublecane]

“A lot of people said that in 1929. The rest is history.”

Not Hoover, or much of anyone in government.

“My fellow Americans, the era of capitalism is over. Welcome to a Fresh Deal.”

[stevem]

"We've got a big problem...we need a rescue plan," Bush said minutes after Wall Street shares dropped in line with a global trend and central banks again injected tens of billions of dollars to avert seizure on interbank lending markets.

Have them start with my debts. Then they can move on the the Maes and the Macs and AIG etal.

[uncbob]

After a rescue for US savings giant Washington Mutual in the biggest-ever US banking failure,

It was bought by Morgan Stanley

[JasonC]

No, JP Morgan Chase bought it. Not the same company. JP Morgan Chase is a deposit bank, Morgan Stanley is a wall street investment bank that specializing in issuing securities for other companies etc.

Also, the Wa Mu failure wiped out $25 billion in bondholders - well the senior bits may get 10 cents on the dollar - and that is a large part of what sparked the sell off in the bonds of other distressed banks. Wachovia debt sold at 130% yields today. National City, 60%. Morgan Stanley, 40%. Several smaller local banks likewise in the critical ward.

[JasonC]

Also, technically the sequence of events was - the FDIC declared Wa Mu failed and seized it, then sold all of its assets and *only* its deposit liabilities to JP Morgan, for a $1.9 billion payment into the FDIC's loss reserve fund. The bondholders of Wa Mu were left with the residual cash in the parent holding company - about $2.5 billion in current assets - to cover $25 billion in bondholder liabilities. The Wa Mu shareholders, common and preferred, were wiped out. Junior bondholders will be luck to see a few cents, senior bondholders may get around 20 cents on the dollar.

Every distressed bank's debt therefore traded down to junk bond status, if not in default status, on the failure. Wachovia's debt hit 130% yields and it is in merger talks with Citigroup and Wells Fargo, because it can't survive as an independent institution if if can't raise money at reasonable rates.

[VRWC For Truth]

BUSH, STFU. 6 weeks to go.

[Ernest_at_the_Beach]

De leveraging is a bitch.

[Ernest_at_the_Beach]

Definitions:

Deleverage

[Ernest_at_the_Beach]

1929 is the model for my fear.

[narses]

This is not a correction, it is a total systemic failure. No more banking system. TEOTWAWKI.