Posted on 09/27/2008 11:32:07 AM PDT by Petronski
I've received phone calls in the last hour from two economists I respect, one of them Larry Lindsey, the other in a position where he'd prefer not to be named. Both have government experience, neither is alarmist by nature, and they say this:
The huge European bank Fortis is apparently about to fail. The ripple effect on the American banking system could be disastrous, with bank runs, liquidity crises, and stock sell offs possible Monday. Wachovia may well fail next week. As Larry put it, this really will be 1933 soon if we don't move rapidly to stabilize the banking system.
And here's the bad news: the current bailout bill, whatever its merits and likelihood of passage, does nothing to address this.
Congress should pass by Monday simple legislation doing two things:
1. Giving the FDIC authority to provide unlimited deposit insurance through the FDIC for transaction accounts in banks.
2. Authorizing the Secretary of the Treasury to provide unlimited protection of principal in money market funds through the Treasury's exchange stabilization fund.
Maybe my acquaintances (and I) are too worried; maybe this legislation wouldn't quite be the right solution. But I wanted to sound what may be, unfortunately, a needed alarm.
William Kristol is editor of THE WEEKLY STANDARD.
Funny I thought we were on the precipice last week?
Same precipice. The credit markets are only getting worse.
http://www.reuters.com/article/marketsNews/idUSN2532149120080926
Belgians, Dutch battle to bolster confidence in Fortis
7 hours ago
THE HAGUE (AFP) — Belgian and Dutch officials are keeping in close touch in the fight to maintain confidence in financial group Fortis as liquidity concerns hammer its shares, officials said Saturday.
Dutch Finance Minister Wouter Bos is in “regular contact” with his Belgian counterpart Didier Reynders, ministry spokesman Jilles Heringa said, as were the respective financial watchdogs of each country.
But Heringa said he could neither confirm nor deny reports of a crisis meeting between Bos, Renders and the head of the Eurogroup, Luxembourg’s prime minister and finance minister, Jean-Claude Juncker.
In Brussels, a spokeswoman for the Belgian financial sector supervisor, the CBFA, said that along with the Belgian national bank, “we are working on initiatives to restore confidence in Fortis.
“We are in frequent contact with the prime minister and the finance minister,” as well as “anyone else who can play a role in these initiatives.”
She said that while it was too early to give details, further statements might follow during the weekend.
Fortis late Friday said it had replaced its chief executive, Herman Verwilst, with Filip Dierckx, head of its banking division.
After two days of steep slides in its share price, the Belgian-Dutch banking and insurance group hastily arranged a news conference to assure clients that their deposits were safe and that it had ample funding.
But shares in the group only fell further, sliding nearly 21 percent Friday — down 71 percent since the beginning of the year.
The group, burnt by turmoil on the credit markets, insisted that its “solvency is solid and well above the regulatory minimum.”
Nevertheless, it increased the amount of non-core assets it planned to sell, with plans now to raise from five billion to 10 billion euros (14.6 billion dollars) through disposals both inside and outside its main Benelux operations.
However, it said that there were no plans for a new capital increase and that its capital needs were covered for the next 12 to 18 months.
The share slide comes even though Belgian and Dutch authorities have placed restrictions on short-selling, a technique used to speculate on a drop in a stock price that has been blamed for driving struggling financial shares lower worldwide.
Belgian Finance Minister Reynders appealed Friday “for calm and responsibility from all market participants.”
He also insisted that the group’s customers should not worry about the situation, saying “as everywhere in Europe, we will not leave any client in Belgium in difficulty.”
As the markets closed Friday, Fortis’s market value stood at 13 billion euros — one third of what it was at the end of 2007. Despite assurances, some banking analysts said the group was looking increasingly vulnerable to a takeover.
“A takeover by ING (of the Netherlands) or BNP Paribas (of France) is more and more possible,” Dresdner Kleinwort analyst Jaap Meijer said Friday, adding that BNP Paribas had already shown interest in Fortis in 1999.
Other potential buyers include Spain’s Santander, Germany’s Deutsche Bank or Britain’s HSBC.
Fortis’ Belgian rivals Dexia and KBC refused to comment on a report by the De Tijd newspaper that they could be involved in a rescue deal for the beleaguered bank.
Wachovia isn’t gonna go “poof” - the FDIC would seize it and resell it immediately like with Wamu.
Yeah things have gotten so bad and liquidity so frozen the the Dow spiked 300+ points in the past two days alone...
By the way, I don’t think Ceterpillars situation is worth being a drama queen over. Something tells me that a construction equipment supply company probably won’t excel in this market.
I’m disappointed in you Peter, I remember when you weren’t such a socialist. And now here you are advocating a massive redistribution of wealth, big government intervention, unchecked powers, and welfare.
You should be in those photos standing shoulder to shoulder with Nancy Pelosi and Barney Frank.
I read somewhere that a lot of “rich” are taking their money out of the banks. I’m talking half million at a time. That will cause the banks to shut down pretty quick.
I’m afraid this is going to get scarry....survival of the fittest. Now all of a sudden those “nuts” who bought land in the hills and stored fuel, food and ammo aren’t looking so dumb. Guess all I can do at this point is buy a gun and try to find some Mormons. They’ve all got 2 years of food put away.
[Snip][This is not an attempt, to engage in an argument with the president. I have admiration for the president; and I have supported the president, as have house Republicans when he has been correct.But he is in error now.House Republicans stood and supported the Petraeas Surge so our troops would have victory in Iraq.Today, House Republicans oppose the Paulson Splurge, so that we can have prosperity in the long run. And make no mistake we understand the gravity of this situation; but we will not engage in a miss-rush to judgment, that destroys the possibilities of a free market and prosperity for American families for decades to come.We will not walk out of this room after a forced vote, waiving a piece of paper in our hands, claiming "Fleece in our Time". We will do the job we were entrusted and we will get the job done.]--Rep. Thaddeus McCotter, R-Michigan, 11th District.
Oh Bull, comrade petronsky. Nothing of the sort.You want to see class-warfare, take a look at Dick Fuld and his merry band of NY Fedster/Fraudster "Robin Hood" foundation "philanthropists". It is what it is; and, unlike Dick and Co., Robin Hood didn't steal from the middle class.
Neil talking about it again now- Fortis has gone down 75%.
FOX is doing a good job of covering everything today..
Correct. The world isn’t due to end until Monday, 0 hours GMT.
Cool! I’ll be ready!
I guess Kristol’s contacts knew what they were talking about. This looks like a world melt down. I don’t believe the US Congress’ failure to pass a bail out plan on Friday is causing all this. There’s a lot more to it that’s way over my head.
It’ll be harder for the US to bailout a foreign bank, one would think. Either way, it’ll be interesting to see what European governments do, besides find a way to point fingers at the US.
Do you know any good deals on bulk quantities of canned beans and mine shafts?
Foreign banks invested in “INFLATED” and bogus mortgages. Anyone who invested in mortgages is in the red or headed that way. And that’s all banks!
I’m one of them. Feels good to be prepared - for anything.
There’s general consensus we have a real crisis - it’s the solution that is at question.
Neil says Fortis is analogous to AIG.
House Dems wants a new across the board tax of security firms. per Neil just now
Wow. Name-calling.
Your argument must be incredibly strong.
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