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Thursday, October 30, 2008
Sunday, October 26, 2008
Insolvency!
from paul.kedrosky.com
October 23, 2008
The Bank Capital Mirage
The following more or less supports what some have been saying for a while -– that major banks in the U.S. and the U.K. will end up being entirely nationalized before this crisis is over –- but it's still a striking way of looking at the data. The gist: Government recapitalization and other fund-raising has largely been in service of banks' prior subprime losses, while corporate and consumer loans are just starting to hit bank balance sheets. It won't take much to tip banks over into insolvency again.
[via Bloomberg]
Also from ftalphaville.ft.com
This is a singularly arresting chart (same as the one posted above):
It’s Bloomberg’s chart of the day and has been reproduced by Paul Kedrosky on his blog, Infectious Greed.
Kedrosky writes:
The following more or less supports what some have been saying for a while — that major banks in the U.S. and the U.K. will end up being entirely nationalized before this crisis is over — but it’s still a striking way of looking at the data. The gist: Government recapitalization and other fund-raising has largely been in service of banks’ prior subprime losses, while corporate and consumer loans are just starting to hit bank balance sheets. It won’t take much to tip banks over into insolvency again.
This is frightening stuff. Not least because the Fed’s own balance sheet is not looking healthy. Via Brad Setser at the CFR, here’s Paul Swartz’s latest graph:
The balance sheet is likely to grow further too. Jan Hatzius, Goldman’s chief economist has pointed out that during the Japanese credit crisis of the 1990s, the Bank of Japan ended up with a balance sheet equivalent to 30 per cent of GDP. The Fed’s is currently 12 per cent. And on Wednesday the Fed made this announcement:
The Federal Reserve Board on Wednesday announced that it will alter the formula used to determine the interest rate paid to depository institutions on excess balances.
Previously, the rate on excess balances had been set as the lowest federal funds rate target established by the Federal Open Market Committee (FOMC) in effect during the reserve maintenance period minus 75 basis points. Under the new formula, the rate on excess balances will be set equal to the lowest FOMC target rate in effect during the reserve maintenance period less 35 basis points. This change will become effective for the maintenance periods beginning Thursday, October 23.
Which is an admission, basically, that the Fed lost control of the Federal Funds Rate. And if that needed proving, take a look at the graph from the New York Fed:
October 23, 2008
The Bank Capital Mirage
The following more or less supports what some have been saying for a while -– that major banks in the U.S. and the U.K. will end up being entirely nationalized before this crisis is over –- but it's still a striking way of looking at the data. The gist: Government recapitalization and other fund-raising has largely been in service of banks' prior subprime losses, while corporate and consumer loans are just starting to hit bank balance sheets. It won't take much to tip banks over into insolvency again.
[via Bloomberg]
Also from ftalphaville.ft.com
This is a singularly arresting chart (same as the one posted above):
It’s Bloomberg’s chart of the day and has been reproduced by Paul Kedrosky on his blog, Infectious Greed.
Kedrosky writes:
The following more or less supports what some have been saying for a while — that major banks in the U.S. and the U.K. will end up being entirely nationalized before this crisis is over — but it’s still a striking way of looking at the data. The gist: Government recapitalization and other fund-raising has largely been in service of banks’ prior subprime losses, while corporate and consumer loans are just starting to hit bank balance sheets. It won’t take much to tip banks over into insolvency again.
This is frightening stuff. Not least because the Fed’s own balance sheet is not looking healthy. Via Brad Setser at the CFR, here’s Paul Swartz’s latest graph:
The balance sheet is likely to grow further too. Jan Hatzius, Goldman’s chief economist has pointed out that during the Japanese credit crisis of the 1990s, the Bank of Japan ended up with a balance sheet equivalent to 30 per cent of GDP. The Fed’s is currently 12 per cent. And on Wednesday the Fed made this announcement:
The Federal Reserve Board on Wednesday announced that it will alter the formula used to determine the interest rate paid to depository institutions on excess balances.
Previously, the rate on excess balances had been set as the lowest federal funds rate target established by the Federal Open Market Committee (FOMC) in effect during the reserve maintenance period minus 75 basis points. Under the new formula, the rate on excess balances will be set equal to the lowest FOMC target rate in effect during the reserve maintenance period less 35 basis points. This change will become effective for the maintenance periods beginning Thursday, October 23.
Which is an admission, basically, that the Fed lost control of the Federal Funds Rate. And if that needed proving, take a look at the graph from the New York Fed:
Lastly a nice picture courtesy of http://www.ridingthedax.com/
http://www.ridingthedax.com/2008/10/23/bubble-banks-revisited/I have been harping for a while about insolvency issues. Looks like many others are catching on. The is one of the first issues that needs to be tackled. Unfortunately President Bush has made it clear that Nationalization wont happen on his watch. Volcker mentioned that banks have been "effectively" nationalized either overtly or through other lines by the Fed. But this is lack of clarity as many of these banks have market capitalizations well in excess of their balance sheet worthiness. What we vitally need right now is clarity (read the end of the insolvency issues) and then an INTELLIGENT strategy to combat the simultaneous develeraging of both banking and consumer levels -(regulating derivatives, debt restructuring of consumers, creation more jobs in the creation of tangible goods in the US, simultaneous creation of incentives for savings and increasing money velocity) etc.
Battle for VA: I'm voting for the n***er
Read the first and last paragraphs for the story
from http://www.fivethirtyeight.com/
On the Road: Big Stone Gap, Virginia
Last week, Julie Hensley made one of her thousands of phone calls on behalf of Barack Obama. A woman answered. As Hensley ran through her short script, the husband impatiently broke in. "Ma'am, we're voting for the n***er." And hung up. Hensley wasn't having it. "I went and made a couple other calls but chafed over this absurdity," she told us, "so I called them back, as I still had a couple questions for the wife." This time the man answered, asked pointedly who she was, and when she replied he hung up again.
We continue to hear stories like these in Appalachia. Big Stone Gap, where Barack Obama's southwesternmost field office in Virginia sits, gave us our latest version.
In Abingdon, where John McCain's Victory Center field office has been open nearly a month, we spoke with Don Carty, one of John McCain's U.S. Naval Academy '58 classmates. He strongly supported his fellow Middie in 2000, only to see "the ultraconservatives in the Republican Party (keep) him off the ticket." Remembering the days when the "Pat Robertson, Jerry Falwell crew" ignored McCain's offer to speak in this part of the state, Carty told us how he'd worked a booth at the county fair for a week prior to the Abingdon office opening where folks stopped in for bumper stickers and yard signs.Noting that this was the most he'd ever seen people express interest in the Republican campaign since he'd moved to the area in 1993, Carty offered that it was precisely because the independent voters in the area identified with McCain's maverick argument. When Sarah Palin was added to the ticket, Carty thought to himself, "John McCain just won the election."Two or three people a day drop in to make phone calls each day, Carty said, and the office was more involved with the state elections.
Another McCain volunteer, David Goldman, a native Englishman and resident of Dallas, Texas, gave us an interesting story. He'd contacted the campaign, asked where he could best volunteer, and on his own dime found his way to Abingdon, where he helps in the office every day. "I have no political experience," Goldman emphasized, "but I was so frustrated, having grown up in socialist England, I just know what Obama's going to bring." Health care, and his view that Americans didn't understand how terrible the situation was in England, was his primary concern. Highlighting the long waits for doctor visits and expensive care in England, Goldman said, "I'm just tired of hearing about how great England's health care system is. People are dying because they're not getting that treatment."Feeling compelled to help in any way he could, the middle-aged software salesman had been working since Sunday making phone calls, preparing canvass sheets, and doing whatever else he could to help. "It's just blocking and tackling.""I don't mind Democrats or Republicans," Goldman said. "This is far left wing socialism." Since he'd been volunteering, more and more folks had dropped by the office, getting involved when they wouldn't normally do so, he observed.
Goldman isn't the only native European to apply sweat labor to the Battle for Virginia. Back in Charlottesville, we encountered Alex Englehard, a German from Heidelberg pursuing his legal degree and on break after his fifth-year exams. Englehard, a dedicated full-time Obama volunteer, said many Americans "don't realize how big an impact this one election has on the rest of the world."He reported getting a few scattered complaints that a foreign citizen would get involved in American elections, but that they all came from people who told him they were supporting McCain. Nobody brought it up the day we tagged along. Though Englehard speaks English fluently and has many direct connections to America, some cultural gaps remain, which one recent incident illustrated. Englehard and a canvass partner approached a door of a house where a racist bumper sticker adorned the car parked there. Englehard had seen the sticker; his partner hadn't. Englehard hadn't understood the bumper sticker's implication, and the two avoided a possible confrontation when the door went unanswered. On the way out, the partner noticed the sticker. "He gave me a good lesson on what to watch for," Englehard chuckled.[UPDATE] Many queries. The bumper sticker said "If I'd known it'd be this much trouble, I'd have picked the cotton myself." You can see why this would go past a foreign citizen.
Mitch Stewart, Virginia State Director of Obama for America and one of the heroes of Iowa, told us in a sit-down interview that the Campaign for Change now boasted 49 offices in Virginia, with an additional 23 Virginia Coordinated Campaign party offices. 40 additional GOTV offices, not including the myriad GOTV staging locations clustered out from those offices, were already up and running.One of the cultural inside baseball games of campaign staffs, especially one as data-driven as the Obama campaign, is that everywhere you go there's a competition for numbers. Regional field directors must beat other regional field directors for doors knocked. One state must beat another for voter contacts. Individual field organizers must beat others in their office for dials. The competition is friendly but fierce. It's a pride thing.So when Stewart heard that his friend Jeremy Bird in Ohio had reported reaching 90% of his state's Neighborhood Team Leader goal, Stewart made sure to tell us that as of last Friday, Virginia's organizers had identified and trained 92% of its NTL goal. Your serve, J.B.[UPDATE] Bird was happy to inform us that Ohio is now at 93% of its NTLs trained and tested. Sorry Stewart.On a more serious note, Stewart talked about the success of the Iowa and the lessons the campaign had learned in developing its field program for the general election. "In Iowa," Stewart said, the question was, "will young voters under 30 and first time voters show up?" The answer was a resounding yes. "If you design a program and actively engage these voters" you can get the turnout you need, he said. Strong Virginia voter files are complemented by Catalist, the sophisticated datamining tool Democrats have begun to use the past two cycles. Catalist fills in holes where the voter file isn't complete. As Chris Schoenewald told us on the Republican side, good localized voter databases are better than a modeling tool, no matter how predictive the tool is. Voter Vault and Catalist predict voter behavior. Voter files are actual records of party-to-voter contact.Stewart told us that what the Obama campaign had done from the beginning of the race was more than traditional door to door and phone calls, more than just social networking, but "an extreme data acquisition" so that downstream the campaign could advertise and educate its potential voters. "It's all about education," said Stewart. Text messages and email addresses the campaign collected, for example, allowed the campaign to much more precisely aim its message as well as technical details like what to bring to the polls when voting, or where an individual's polling location was. Fundraising, of course, and pushing back against smear campaigns are included in this direct contact from the campaign.Virginia saw 438,000 newly registered voters this cycle, in large part due to the same systematic, relentless outreach to under-registered potential Democratic voters. If Virginia goes blue for the first time in 44 years at the presidential level, it shouldn't be forgotten that this race was won upstream with that effort.
By chance, we ran into James Gibbs, National Director of Organizing for the United Mine Workers of America, in Obama's Big Stone Gap office. After President of the UMWA Cecil Roberts endorsed Obama, "the membership went wholeheartedly" for the Democrat. "We want health and safety in these mines," said Gibbs. For the UMWA membership, Gibbs said, Barack Obama was the clear choice, and the membership was actively canvassing and phonebanking in nearby Castlewood and St. Paul.UMWA member Dennis R. Blagg, Sr. told us of his canvassing experiences in Big Stone Gap. Having knocked on at least 250 doors in the last two weeks, Blagg was "puzzled by some of the... slurs" aimed his way as he canvassed for Obama. Referring to the Republican ticket he viewed as responsible for fomenting racially harmful attitudes in his county, "they try to have scare tactics" to gin up division.It was Joe Biden's visit two and a half weeks prior that spurred Blagg into action. Referring to McCain, "They talk about experience... that guy's had 26 years of experience. Why hasn't he used it?"
As for Hensley, her story ended with a twist. A couple hours later during a pause in her dials, her phone rang. She recognized the number. "This is going to be good," she remembers thinking, getting ready to scrap. It was the husband. He was calling for the woman on whom he'd hung up. She then got something she didn't expect -- an apology. Calmly, Hensley told the man she'd accept his apology on one condition -- he had to tell her who he was voting for. "Oh, I don't normally talk about it but I feel like I owe you," the man said. "I am voting for Senator Obama." He asked if Hensley would like to speak to his wife, as he'd interrupted the original call. Hensley mentioned that she had been surprised when he'd called to apologize. Apparently the husband and wife had been talking the entire couple hours since the original call. "Did she get upset with you?" Hensley asked."What do you think?" the man replied.
Eleven days.
Race has been America's San Andreas fault. This historic election may finally give us a President who is neither black nor white but BOTH by parentage. Although Barack Obama identifies himself as a black man and so does most of the country - it is important to note that Barack is a child of both black and white parents. A child of love between a black man from Kenya and a white woman from Kansas. My daughter, in particular, identifies with that as she herself is of mixed heritage. As we draw ever nearer to one of the most historic days we are likely to witness in our lifetime, I am ever more hopeful about the future of this great land.
from http://www.fivethirtyeight.com/
On the Road: Big Stone Gap, Virginia
Last week, Julie Hensley made one of her thousands of phone calls on behalf of Barack Obama. A woman answered. As Hensley ran through her short script, the husband impatiently broke in. "Ma'am, we're voting for the n***er." And hung up. Hensley wasn't having it. "I went and made a couple other calls but chafed over this absurdity," she told us, "so I called them back, as I still had a couple questions for the wife." This time the man answered, asked pointedly who she was, and when she replied he hung up again.
We continue to hear stories like these in Appalachia. Big Stone Gap, where Barack Obama's southwesternmost field office in Virginia sits, gave us our latest version.
In Abingdon, where John McCain's Victory Center field office has been open nearly a month, we spoke with Don Carty, one of John McCain's U.S. Naval Academy '58 classmates. He strongly supported his fellow Middie in 2000, only to see "the ultraconservatives in the Republican Party (keep) him off the ticket." Remembering the days when the "Pat Robertson, Jerry Falwell crew" ignored McCain's offer to speak in this part of the state, Carty told us how he'd worked a booth at the county fair for a week prior to the Abingdon office opening where folks stopped in for bumper stickers and yard signs.Noting that this was the most he'd ever seen people express interest in the Republican campaign since he'd moved to the area in 1993, Carty offered that it was precisely because the independent voters in the area identified with McCain's maverick argument. When Sarah Palin was added to the ticket, Carty thought to himself, "John McCain just won the election."Two or three people a day drop in to make phone calls each day, Carty said, and the office was more involved with the state elections.
Another McCain volunteer, David Goldman, a native Englishman and resident of Dallas, Texas, gave us an interesting story. He'd contacted the campaign, asked where he could best volunteer, and on his own dime found his way to Abingdon, where he helps in the office every day. "I have no political experience," Goldman emphasized, "but I was so frustrated, having grown up in socialist England, I just know what Obama's going to bring." Health care, and his view that Americans didn't understand how terrible the situation was in England, was his primary concern. Highlighting the long waits for doctor visits and expensive care in England, Goldman said, "I'm just tired of hearing about how great England's health care system is. People are dying because they're not getting that treatment."Feeling compelled to help in any way he could, the middle-aged software salesman had been working since Sunday making phone calls, preparing canvass sheets, and doing whatever else he could to help. "It's just blocking and tackling.""I don't mind Democrats or Republicans," Goldman said. "This is far left wing socialism." Since he'd been volunteering, more and more folks had dropped by the office, getting involved when they wouldn't normally do so, he observed.
Goldman isn't the only native European to apply sweat labor to the Battle for Virginia. Back in Charlottesville, we encountered Alex Englehard, a German from Heidelberg pursuing his legal degree and on break after his fifth-year exams. Englehard, a dedicated full-time Obama volunteer, said many Americans "don't realize how big an impact this one election has on the rest of the world."He reported getting a few scattered complaints that a foreign citizen would get involved in American elections, but that they all came from people who told him they were supporting McCain. Nobody brought it up the day we tagged along. Though Englehard speaks English fluently and has many direct connections to America, some cultural gaps remain, which one recent incident illustrated. Englehard and a canvass partner approached a door of a house where a racist bumper sticker adorned the car parked there. Englehard had seen the sticker; his partner hadn't. Englehard hadn't understood the bumper sticker's implication, and the two avoided a possible confrontation when the door went unanswered. On the way out, the partner noticed the sticker. "He gave me a good lesson on what to watch for," Englehard chuckled.[UPDATE] Many queries. The bumper sticker said "If I'd known it'd be this much trouble, I'd have picked the cotton myself." You can see why this would go past a foreign citizen.
Mitch Stewart, Virginia State Director of Obama for America and one of the heroes of Iowa, told us in a sit-down interview that the Campaign for Change now boasted 49 offices in Virginia, with an additional 23 Virginia Coordinated Campaign party offices. 40 additional GOTV offices, not including the myriad GOTV staging locations clustered out from those offices, were already up and running.One of the cultural inside baseball games of campaign staffs, especially one as data-driven as the Obama campaign, is that everywhere you go there's a competition for numbers. Regional field directors must beat other regional field directors for doors knocked. One state must beat another for voter contacts. Individual field organizers must beat others in their office for dials. The competition is friendly but fierce. It's a pride thing.So when Stewart heard that his friend Jeremy Bird in Ohio had reported reaching 90% of his state's Neighborhood Team Leader goal, Stewart made sure to tell us that as of last Friday, Virginia's organizers had identified and trained 92% of its NTL goal. Your serve, J.B.[UPDATE] Bird was happy to inform us that Ohio is now at 93% of its NTLs trained and tested. Sorry Stewart.On a more serious note, Stewart talked about the success of the Iowa and the lessons the campaign had learned in developing its field program for the general election. "In Iowa," Stewart said, the question was, "will young voters under 30 and first time voters show up?" The answer was a resounding yes. "If you design a program and actively engage these voters" you can get the turnout you need, he said. Strong Virginia voter files are complemented by Catalist, the sophisticated datamining tool Democrats have begun to use the past two cycles. Catalist fills in holes where the voter file isn't complete. As Chris Schoenewald told us on the Republican side, good localized voter databases are better than a modeling tool, no matter how predictive the tool is. Voter Vault and Catalist predict voter behavior. Voter files are actual records of party-to-voter contact.Stewart told us that what the Obama campaign had done from the beginning of the race was more than traditional door to door and phone calls, more than just social networking, but "an extreme data acquisition" so that downstream the campaign could advertise and educate its potential voters. "It's all about education," said Stewart. Text messages and email addresses the campaign collected, for example, allowed the campaign to much more precisely aim its message as well as technical details like what to bring to the polls when voting, or where an individual's polling location was. Fundraising, of course, and pushing back against smear campaigns are included in this direct contact from the campaign.Virginia saw 438,000 newly registered voters this cycle, in large part due to the same systematic, relentless outreach to under-registered potential Democratic voters. If Virginia goes blue for the first time in 44 years at the presidential level, it shouldn't be forgotten that this race was won upstream with that effort.
By chance, we ran into James Gibbs, National Director of Organizing for the United Mine Workers of America, in Obama's Big Stone Gap office. After President of the UMWA Cecil Roberts endorsed Obama, "the membership went wholeheartedly" for the Democrat. "We want health and safety in these mines," said Gibbs. For the UMWA membership, Gibbs said, Barack Obama was the clear choice, and the membership was actively canvassing and phonebanking in nearby Castlewood and St. Paul.UMWA member Dennis R. Blagg, Sr. told us of his canvassing experiences in Big Stone Gap. Having knocked on at least 250 doors in the last two weeks, Blagg was "puzzled by some of the... slurs" aimed his way as he canvassed for Obama. Referring to the Republican ticket he viewed as responsible for fomenting racially harmful attitudes in his county, "they try to have scare tactics" to gin up division.It was Joe Biden's visit two and a half weeks prior that spurred Blagg into action. Referring to McCain, "They talk about experience... that guy's had 26 years of experience. Why hasn't he used it?"
As for Hensley, her story ended with a twist. A couple hours later during a pause in her dials, her phone rang. She recognized the number. "This is going to be good," she remembers thinking, getting ready to scrap. It was the husband. He was calling for the woman on whom he'd hung up. She then got something she didn't expect -- an apology. Calmly, Hensley told the man she'd accept his apology on one condition -- he had to tell her who he was voting for. "Oh, I don't normally talk about it but I feel like I owe you," the man said. "I am voting for Senator Obama." He asked if Hensley would like to speak to his wife, as he'd interrupted the original call. Hensley mentioned that she had been surprised when he'd called to apologize. Apparently the husband and wife had been talking the entire couple hours since the original call. "Did she get upset with you?" Hensley asked."What do you think?" the man replied.
Eleven days.
Race has been America's San Andreas fault. This historic election may finally give us a President who is neither black nor white but BOTH by parentage. Although Barack Obama identifies himself as a black man and so does most of the country - it is important to note that Barack is a child of both black and white parents. A child of love between a black man from Kenya and a white woman from Kansas. My daughter, in particular, identifies with that as she herself is of mixed heritage. As we draw ever nearer to one of the most historic days we are likely to witness in our lifetime, I am ever more hopeful about the future of this great land.
Friday, October 24, 2008
Quite a ringing endorsement!
from the Editorial Board of the New York Times.
October 24, 2008
Editorial
Barack Obama for President
Hyperbole is the currency of presidential campaigns, but this year the nation’s future truly hangs in the balance.
The United States is battered and drifting after eight years of President Bush’s failed leadership. He is saddling his successor with two wars, a scarred global image and a government systematically stripped of its ability to protect and help its citizens — whether they are fleeing a hurricane’s floodwaters, searching for affordable health care or struggling to hold on to their homes, jobs, savings and pensions in the midst of a financial crisis that was foretold and preventable.
As tough as the times are, the selection of a new president is easy. After nearly two years of a grueling and ugly campaign, Senator Barack Obama of Illinois has proved that he is the right choice to be the 44th president of the United States.
•
Mr. Obama has met challenge after challenge, growing as a leader and putting real flesh on his early promises of hope and change. He has shown a cool head and sound judgment. We believe he has the will and the ability to forge the broad political consensus that is essential to finding solutions to this nation’s problems.
In the same time, Senator John McCain of Arizona has retreated farther and farther to the fringe of American politics, running a campaign on partisan division, class warfare and even hints of racism. His policies and worldview are mired in the past. His choice of a running mate so evidently unfit for the office was a final act of opportunism and bad judgment that eclipsed the accomplishments of 26 years in Congress.
Given the particularly ugly nature of Mr. McCain’s campaign, the urge to choose on the basis of raw emotion is strong. But there is a greater value in looking closely at the facts of life in America today and at the prescriptions the candidates offer. The differences are profound.
Mr. McCain offers more of the Republican every-man-for-himself ideology, now lying in shards on Wall Street and in Americans’ bank accounts. Mr. Obama has another vision of government’s role and responsibilities.
In his convention speech in Denver, Mr. Obama said, “Government cannot solve all our problems, but what it should do is that which we cannot do for ourselves: protect us from harm and provide every child a decent education; keep our water clean and our toys safe; invest in new schools and new roads and new science and technology.”
Since the financial crisis, he has correctly identified the abject failure of government regulation that has brought the markets to the brink of collapse.
The Economy
The American financial system is the victim of decades of Republican deregulatory and anti-tax policies. Those ideas have been proved wrong at an unfathomable price, but Mr. McCain — a self-proclaimed “foot soldier in the Reagan revolution” — is still a believer.
Mr. Obama sees that far-reaching reforms will be needed to protect Americans and American business.
Mr. McCain talks about reform a lot, but his vision is pinched. His answer to any economic question is to eliminate pork-barrel spending — about $18 billion in a $3 trillion budget — cut taxes and wait for unfettered markets to solve the problem.
Mr. Obama is clear that the nation’s tax structure must be changed to make it fairer. That means the well-off Americans who have benefited disproportionately from Mr. Bush’s tax cuts will have to pay some more. Working Americans, who have seen their standard of living fall and their children’s options narrow, will benefit. Mr. Obama wants to raise the minimum wage and tie it to inflation, restore a climate in which workers are able to organize unions if they wish and expand educational opportunities.
Mr. McCain, who once opposed President Bush’s tax cuts for the wealthy as fiscally irresponsible, now wants to make them permanent. And while he talks about keeping taxes low for everyone, his proposed cuts would overwhelmingly benefit the top 1 percent of Americans while digging the country into a deeper fiscal hole.
National Security
The American military — its people and equipment — is dangerously overstretched. Mr. Bush has neglected the necessary war in Afghanistan, which now threatens to spiral into defeat. The unnecessary and staggeringly costly war in Iraq must be ended as quickly and responsibly as possible.
While Iraq’s leaders insist on a swift drawdown of American troops and a deadline for the end of the occupation, Mr. McCain is still talking about some ill-defined “victory.” As a result, he has offered no real plan for extracting American troops and limiting any further damage to Iraq and its neighbors.
Mr. Obama was an early and thoughtful opponent of the war in Iraq, and he has presented a military and diplomatic plan for withdrawing American forces. Mr. Obama also has correctly warned that until the Pentagon starts pulling troops out of Iraq, there will not be enough troops to defeat the Taliban and Al Qaeda in Afghanistan.
Mr. McCain, like Mr. Bush, has only belatedly focused on Afghanistan’s dangerous unraveling and the threat that neighboring Pakistan may quickly follow.
Mr. Obama would have a learning curve on foreign affairs, but he has already showed sounder judgment than his opponent on these critical issues. His choice of Senator Joseph Biden — who has deep foreign-policy expertise — as his running mate is another sign of that sound judgment. Mr. McCain’s long interest in foreign policy and the many dangers this country now faces make his choice of Gov. Sarah Palin of Alaska more irresponsible.
Both presidential candidates talk about strengthening alliances in Europe and Asia, including NATO, and strongly support Israel. Both candidates talk about repairing America’s image in the world. But it seems clear to us that Mr. Obama is far more likely to do that — and not just because the first black president would present a new American face to the world.
Mr. Obama wants to reform the United Nations, while Mr. McCain wants to create a new entity, the League of Democracies — a move that would incite even fiercer anti-American furies around the world.
Unfortunately, Mr. McCain, like Mr. Bush, sees the world as divided into friends (like Georgia) and adversaries (like Russia). He proposed kicking Russia out of the Group of 8 industrialized nations even before the invasion of Georgia. We have no sympathy for Moscow’s bullying, but we also have no desire to replay the cold war. The United States must find a way to constrain the Russians’ worst impulses, while preserving the ability to work with them on arms control and other vital initiatives.
Both candidates talk tough on terrorism, and neither has ruled out military action to end Iran’s nuclear weapons program. But Mr. Obama has called for a serious effort to try to wean Tehran from its nuclear ambitions with more credible diplomatic overtures and tougher sanctions. Mr. McCain’s willingness to joke about bombing Iran was frightening.
The Constitution and the Rule of Law
Under Mr. Bush and Vice President Dick Cheney, the Constitution, the Bill of Rights, the justice system and the separation of powers have come under relentless attack. Mr. Bush chose to exploit the tragedy of Sept. 11, 2001, the moment in which he looked like the president of a unified nation, to try to place himself above the law.
Mr. Bush has arrogated the power to imprison men without charges and browbeat Congress into granting an unfettered authority to spy on Americans. He has created untold numbers of “black” programs, including secret prisons and outsourced torture. The president has issued hundreds, if not thousands, of secret orders. We fear it will take years of forensic research to discover how many basic rights have been violated.
Both candidates have renounced torture and are committed to closing the prison camp in
Guantánamo Bay, Cuba.
But Mr. Obama has gone beyond that, promising to identify and correct Mr. Bush’s attacks on the democratic system. Mr. McCain has been silent on the subject.
Mr. McCain improved protections for detainees. But then he helped the White House push through the appalling Military Commissions Act of 2006, which denied detainees the right to a hearing in a real court and put Washington in conflict with the Geneva Conventions, greatly increasing the risk to American troops.
The next president will have the chance to appoint one or more justices to a Supreme Court that is on the brink of being dominated by a radical right wing. Mr. Obama may appoint less liberal judges than some of his followers might like, but Mr. McCain is certain to pick rigid ideologues. He has said he would never appoint a judge who believes in women’s reproductive rights.
The Candidates
It will be an enormous challenge just to get the nation back to where it was before Mr. Bush, to begin to mend its image in the world and to restore its self-confidence and its self-respect. Doing all of that, and leading America forward, will require strength of will, character and intellect, sober judgment and a cool, steady hand.
Mr. Obama has those qualities in abundance. Watching him being tested in the campaign has long since erased the reservations that led us to endorse Senator Hillary Rodham Clinton in the Democratic primaries. He has drawn in legions of new voters with powerful messages of hope and possibility and calls for shared sacrifice and social responsibility.
Mr. McCain, whom we chose as the best Republican nominee in the primaries, has spent the last coins of his reputation for principle and sound judgment to placate the limitless demands and narrow vision of the far-right wing. His righteous fury at being driven out of the 2000 primaries on a racist tide aimed at his adopted daughter has been replaced by a zealous embrace of those same win-at-all-costs tactics and tacticians.
He surrendered his standing as an independent thinker in his rush to embrace Mr. Bush’s misbegotten tax policies and to abandon his leadership position on climate change and immigration reform.
Mr. McCain could have seized the high ground on energy and the environment. Earlier in his career, he offered the first plausible bill to control America’s emissions of greenhouse gases. Now his positions are a caricature of that record: think Ms. Palin leading chants of “drill, baby, drill.”
Mr. Obama has endorsed some offshore drilling, but as part of a comprehensive strategy including big investments in new, clean technologies.
•
Mr. Obama has withstood some of the toughest campaign attacks ever mounted against a candidate. He’s been called un-American and accused of hiding a secret Islamic faith. The Republicans have linked him to domestic terrorists and questioned his wife’s love of her country. Ms. Palin has also questioned millions of Americans’ patriotism, calling Republican-leaning states “pro-America.”
This politics of fear, division and character assassination helped Mr. Bush drive Mr. McCain from the 2000 Republican primaries and defeat Senator John Kerry in 2004. It has been the dominant theme of his failed presidency.
The nation’s problems are simply too grave to be reduced to slashing “robo-calls” and negative ads. This country needs sensible leadership, compassionate leadership, honest leadership and strong leadership. Barack Obama has shown that he has all of those qualities.
October 24, 2008
Editorial
Barack Obama for President
Hyperbole is the currency of presidential campaigns, but this year the nation’s future truly hangs in the balance.
The United States is battered and drifting after eight years of President Bush’s failed leadership. He is saddling his successor with two wars, a scarred global image and a government systematically stripped of its ability to protect and help its citizens — whether they are fleeing a hurricane’s floodwaters, searching for affordable health care or struggling to hold on to their homes, jobs, savings and pensions in the midst of a financial crisis that was foretold and preventable.
As tough as the times are, the selection of a new president is easy. After nearly two years of a grueling and ugly campaign, Senator Barack Obama of Illinois has proved that he is the right choice to be the 44th president of the United States.
•
Mr. Obama has met challenge after challenge, growing as a leader and putting real flesh on his early promises of hope and change. He has shown a cool head and sound judgment. We believe he has the will and the ability to forge the broad political consensus that is essential to finding solutions to this nation’s problems.
In the same time, Senator John McCain of Arizona has retreated farther and farther to the fringe of American politics, running a campaign on partisan division, class warfare and even hints of racism. His policies and worldview are mired in the past. His choice of a running mate so evidently unfit for the office was a final act of opportunism and bad judgment that eclipsed the accomplishments of 26 years in Congress.
Given the particularly ugly nature of Mr. McCain’s campaign, the urge to choose on the basis of raw emotion is strong. But there is a greater value in looking closely at the facts of life in America today and at the prescriptions the candidates offer. The differences are profound.
Mr. McCain offers more of the Republican every-man-for-himself ideology, now lying in shards on Wall Street and in Americans’ bank accounts. Mr. Obama has another vision of government’s role and responsibilities.
In his convention speech in Denver, Mr. Obama said, “Government cannot solve all our problems, but what it should do is that which we cannot do for ourselves: protect us from harm and provide every child a decent education; keep our water clean and our toys safe; invest in new schools and new roads and new science and technology.”
Since the financial crisis, he has correctly identified the abject failure of government regulation that has brought the markets to the brink of collapse.
The Economy
The American financial system is the victim of decades of Republican deregulatory and anti-tax policies. Those ideas have been proved wrong at an unfathomable price, but Mr. McCain — a self-proclaimed “foot soldier in the Reagan revolution” — is still a believer.
Mr. Obama sees that far-reaching reforms will be needed to protect Americans and American business.
Mr. McCain talks about reform a lot, but his vision is pinched. His answer to any economic question is to eliminate pork-barrel spending — about $18 billion in a $3 trillion budget — cut taxes and wait for unfettered markets to solve the problem.
Mr. Obama is clear that the nation’s tax structure must be changed to make it fairer. That means the well-off Americans who have benefited disproportionately from Mr. Bush’s tax cuts will have to pay some more. Working Americans, who have seen their standard of living fall and their children’s options narrow, will benefit. Mr. Obama wants to raise the minimum wage and tie it to inflation, restore a climate in which workers are able to organize unions if they wish and expand educational opportunities.
Mr. McCain, who once opposed President Bush’s tax cuts for the wealthy as fiscally irresponsible, now wants to make them permanent. And while he talks about keeping taxes low for everyone, his proposed cuts would overwhelmingly benefit the top 1 percent of Americans while digging the country into a deeper fiscal hole.
National Security
The American military — its people and equipment — is dangerously overstretched. Mr. Bush has neglected the necessary war in Afghanistan, which now threatens to spiral into defeat. The unnecessary and staggeringly costly war in Iraq must be ended as quickly and responsibly as possible.
While Iraq’s leaders insist on a swift drawdown of American troops and a deadline for the end of the occupation, Mr. McCain is still talking about some ill-defined “victory.” As a result, he has offered no real plan for extracting American troops and limiting any further damage to Iraq and its neighbors.
Mr. Obama was an early and thoughtful opponent of the war in Iraq, and he has presented a military and diplomatic plan for withdrawing American forces. Mr. Obama also has correctly warned that until the Pentagon starts pulling troops out of Iraq, there will not be enough troops to defeat the Taliban and Al Qaeda in Afghanistan.
Mr. McCain, like Mr. Bush, has only belatedly focused on Afghanistan’s dangerous unraveling and the threat that neighboring Pakistan may quickly follow.
Mr. Obama would have a learning curve on foreign affairs, but he has already showed sounder judgment than his opponent on these critical issues. His choice of Senator Joseph Biden — who has deep foreign-policy expertise — as his running mate is another sign of that sound judgment. Mr. McCain’s long interest in foreign policy and the many dangers this country now faces make his choice of Gov. Sarah Palin of Alaska more irresponsible.
Both presidential candidates talk about strengthening alliances in Europe and Asia, including NATO, and strongly support Israel. Both candidates talk about repairing America’s image in the world. But it seems clear to us that Mr. Obama is far more likely to do that — and not just because the first black president would present a new American face to the world.
Mr. Obama wants to reform the United Nations, while Mr. McCain wants to create a new entity, the League of Democracies — a move that would incite even fiercer anti-American furies around the world.
Unfortunately, Mr. McCain, like Mr. Bush, sees the world as divided into friends (like Georgia) and adversaries (like Russia). He proposed kicking Russia out of the Group of 8 industrialized nations even before the invasion of Georgia. We have no sympathy for Moscow’s bullying, but we also have no desire to replay the cold war. The United States must find a way to constrain the Russians’ worst impulses, while preserving the ability to work with them on arms control and other vital initiatives.
Both candidates talk tough on terrorism, and neither has ruled out military action to end Iran’s nuclear weapons program. But Mr. Obama has called for a serious effort to try to wean Tehran from its nuclear ambitions with more credible diplomatic overtures and tougher sanctions. Mr. McCain’s willingness to joke about bombing Iran was frightening.
The Constitution and the Rule of Law
Under Mr. Bush and Vice President Dick Cheney, the Constitution, the Bill of Rights, the justice system and the separation of powers have come under relentless attack. Mr. Bush chose to exploit the tragedy of Sept. 11, 2001, the moment in which he looked like the president of a unified nation, to try to place himself above the law.
Mr. Bush has arrogated the power to imprison men without charges and browbeat Congress into granting an unfettered authority to spy on Americans. He has created untold numbers of “black” programs, including secret prisons and outsourced torture. The president has issued hundreds, if not thousands, of secret orders. We fear it will take years of forensic research to discover how many basic rights have been violated.
Both candidates have renounced torture and are committed to closing the prison camp in
Guantánamo Bay, Cuba.
But Mr. Obama has gone beyond that, promising to identify and correct Mr. Bush’s attacks on the democratic system. Mr. McCain has been silent on the subject.
Mr. McCain improved protections for detainees. But then he helped the White House push through the appalling Military Commissions Act of 2006, which denied detainees the right to a hearing in a real court and put Washington in conflict with the Geneva Conventions, greatly increasing the risk to American troops.
The next president will have the chance to appoint one or more justices to a Supreme Court that is on the brink of being dominated by a radical right wing. Mr. Obama may appoint less liberal judges than some of his followers might like, but Mr. McCain is certain to pick rigid ideologues. He has said he would never appoint a judge who believes in women’s reproductive rights.
The Candidates
It will be an enormous challenge just to get the nation back to where it was before Mr. Bush, to begin to mend its image in the world and to restore its self-confidence and its self-respect. Doing all of that, and leading America forward, will require strength of will, character and intellect, sober judgment and a cool, steady hand.
Mr. Obama has those qualities in abundance. Watching him being tested in the campaign has long since erased the reservations that led us to endorse Senator Hillary Rodham Clinton in the Democratic primaries. He has drawn in legions of new voters with powerful messages of hope and possibility and calls for shared sacrifice and social responsibility.
Mr. McCain, whom we chose as the best Republican nominee in the primaries, has spent the last coins of his reputation for principle and sound judgment to placate the limitless demands and narrow vision of the far-right wing. His righteous fury at being driven out of the 2000 primaries on a racist tide aimed at his adopted daughter has been replaced by a zealous embrace of those same win-at-all-costs tactics and tacticians.
He surrendered his standing as an independent thinker in his rush to embrace Mr. Bush’s misbegotten tax policies and to abandon his leadership position on climate change and immigration reform.
Mr. McCain could have seized the high ground on energy and the environment. Earlier in his career, he offered the first plausible bill to control America’s emissions of greenhouse gases. Now his positions are a caricature of that record: think Ms. Palin leading chants of “drill, baby, drill.”
Mr. Obama has endorsed some offshore drilling, but as part of a comprehensive strategy including big investments in new, clean technologies.
•
Mr. Obama has withstood some of the toughest campaign attacks ever mounted against a candidate. He’s been called un-American and accused of hiding a secret Islamic faith. The Republicans have linked him to domestic terrorists and questioned his wife’s love of her country. Ms. Palin has also questioned millions of Americans’ patriotism, calling Republican-leaning states “pro-America.”
This politics of fear, division and character assassination helped Mr. Bush drive Mr. McCain from the 2000 Republican primaries and defeat Senator John Kerry in 2004. It has been the dominant theme of his failed presidency.
The nation’s problems are simply too grave to be reduced to slashing “robo-calls” and negative ads. This country needs sensible leadership, compassionate leadership, honest leadership and strong leadership. Barack Obama has shown that he has all of those qualities.
Sunday, October 12, 2008
New World Financial order Part I: European Financial Plan
TEXT-Final statement from euro zone summit in Paris
Sun Oct 12, 2008 3:56pm EDT
PARIS, Oct 12 (Reuters) - Leaders of euro zone countries held an emergency meeting on Sunday to decide pan-European measures aimed at propping up the battered financial sector.
Here is the full final statement released after the summit.
DECLARATION ON A CONCERTED EUROPEAN ACTION PLAN OF THE EURO AREA COUNTRIES
1) Financial systems contribute essentially to the well functioning of our economies and are therefore a necessary prerequisite for growth and a high level of employment. Millions of depositors have trusted their wealth to our financial institutions. The consequences of the current financial market crisis jeopardize the crucial economic role of the financial system.
2) Since the beginning of the crisis, we have acted to address the challenges posed to our financial system: we have committed ourselves to take decisive action and use all availables tools to support relevant institutions and prevent their failure and effectively acted in several cases ; we have increased transparency and disclosure on banks exposure ; we have enhanced retail deposit guarantee protection.
3) Further concerted action is urgently needed given the persistent problems of bank financing and the contagion from the financial crisis to the real economy.
4) We confirm today our commitment to act together in a decisive and comprehensive way in order to restore confidence and proper functioning of the financial system, aiming at restoring appropriate and efficient financing conditions for the economy. In parallel, Member States agree to coordinate measures to address the consequences of the financial crisis on the real economy, in line with 7th of October Ecofin conclusions. In particular, we welcome the EIB's decision to mobilise 30 billions - to support European SME's and its commitment to step up its ability to intervene in infrastructure projects.
5) As members of the Euro area, we share a common responsibility and have to contribute to a common European approach. We invite our European partners to adopt the following principles so that the European Union as a whole can act in a united manner and avoid that national measures adversely affect the functioning of the single market and the other member States.
This requires European Union and Euro area governments, central banks and supervisors to agree to a coordinated approach aiming at : - ensuring appropriate liquidity conditions for financial institutions ; - facilitating the funding of banks, which is currently constrained ; - providing financial institutions with additional capital ressources so as to continue to ensure the proper financing of the economy ; - allowing for an efficient recapitalisation of distressed banks; - ensuring sufficient flexibility in the implementation of accounting rules given current exceptional market circumstances; - enhancing cooperation procedures among European countries. In the current exceptional circumstances, we stress the need for the Commission to continue to act quickly and apply flexibility in state aid decisions, continuing to uphold the principles of the single market and of the state aid regime.
Ensuring appropriate liquidity conditions for financial institutions.
6) We welcome the recent decision by the European Central Bank and other Central Banks in the world to cut their interest rates.
7) We also welcome the decisions by the European Central Bank to improve the conditions for the refinancing of banks and to provide more longer term funding. We look forward to Central Banks considering all ways and means to react flexibly to the current market environment.
We welcome the intention of the ECB and the Eurosystem to react flexibly to the current market environment, in particular in considering to further improve its collateral framework with regard to the eligibility of commercial paper. Facilitating the funding of banks, which is currently constrained.
8) With a view to complementing the actions taken by the European Central Bank in the interbank money market, the Governments of the Euro Area are ready to take proper action in a concerted and coordinated manner to improve market functioning over longer term maturities. The objective of such initiatives should be to address funding problems of liquidity constrained solvent banks.
We welcome the initiatives put forward in some member states to facilitate medium term funding of banks notably through purchase of high quality assets or through swaps of government securities. The worsening of financial conditions in the last four weeks requires additional coordinated actions.
To this aim, Governments would make available for an interim period and on appropriate commercial terms, directly or indirectly, a Government guarantee, insurance, or other similar arrangements of new medium term (up to 5 years) bank senior debt issuance. Depending on domestic market conditions in each country, actions could be targeted at some specific and relevant types of debt issuance.
In all cases, these actions will be designed in order to avoid any distortion in the level playing field and possible abuse at the expense of non beneficiaries of these arrangements. As a consequence: - the price of those instruments will reflect at least their true value with respect to normal market conditions ; - all the financial institutions incorporated and operating in our countries and subsidiary of foreign institutions with substantial operations will be eligible, provided they meet the regulatory capital requirements and other non discriminatory objective criteria ; - Governments may impose further conditions for the beneficiaries of these arrangements, including conditions to ensure an adequate support to real economy; - the scheme will be limited in amount, temporary and will be applied under close scrutiny of financial authorities, until December 31 2009.
While acting quickly as required by circumstances, we will coordinate in providing these guarantees as significant differences in national implementation could have a counter-productive effect, creating distortions in the global banking markets. We will also work in cooperation with the European Central Bank so as to ensure consistency with the management of liquidity by the Eurosystem and compatibility with the operational framework of the Eurosystem. Providing financial institutions with additional capital ressources so as to continue to ensure the proper financing of the economy.
9) So as to allow financial institutions to continue to ensure the proper financing of the Eurozone economy, each Member State will make available to financial institutions Tier 1 capital, e.g. by acquiring preferred shares or other instruments including non dilutive ones. Price conditions shall take into account the market situation of each involved instution. Governments commit themselves to provide capital when needed in appropriate volume while favouring by all available means the raising of private capital. Financial institutions should be obliged to accept additionnal restrictions, notably to preclude possible abuse of such arrangements at the expense of non beneficiaries.
10) Given the exceptional market circumstances, we urge national supervisors, in accordance with the spirit of Basel 2 rules, to implement prudential rules also with a view to stabilising the financial system. Allowing for an efficient recapitalisation of distressed banks.
11) Governments remain committed to support the financial system and therefore to avoid the failure of relevant financial institutions, through appropriate means including recapitalization. In doing so, we will be watchful regarding the interest of taxpayers and ensure that existing shareholders and management bear the due consequences of the intervention. Emergency recapitalisation of a given institution shall be followed by an appropriate restructuring plan.
Ensuring sufficient flexibility in the implementation of accounting rules given current exceptional market circumstances.
12) We welcome the recent initiatives of the Commission regarding conclusions of the 7th October Ecofin regarding the classification of financial instruments by banks between their trading and banking books, notably to ensure a level playing field with our competitors.
Under the current exceptional circumstances, financial and non-financial institutions should be allowed as necessary to value their assets consistently with risk of default assumptions rather than immediate market value which, in illiquid markets may no longer be appropriate.
We ask the competent autorities to take the next steps within the coming days. Enhancing cooperation among European countries.
13) In such circumstances, efficient crisis management requires constant and immediate monitoring. We will therefore set up and strengthen procedures allowing the exchange of information between our Governments, the President of the European Council, the President of the European Commission, the President of the European Central Bank and the President of the Eurogroup. We look forward the European Council on next Wednesday to setting up a mecanism to improve crisis managment between European countries.
14) The Ecofin Council with the support of the Commission and in cooperation with the European Central Bank will report in due time to the European Council on the implementation of these decisions.
© Thomson Reuters 2008. All rights reserved. Users may download and print extracts of content from this website for their own personal and non-commercial use only. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters and its logo are registered trademarks or trademarks of the Thomson Reuters group of companies around the world.
Thomson Reuters journalists are subject to an Editorial Handbook which requires fair presentation and disclosure of relevant interests.
The much needed leadership comes from Europe. Makes one wonder why we didnt see such leadership here. I guess we're too worried to mention recapitalization to large banks in the US since we couldnt have their shareholders suffering. Unless ofcourse the markets do the government job for us. Does the US government honestly not know which banks are insolvent but that Europe does? Volcker - you're needed. Not next year in February - NOW! I guess the sequence of events is supposed to be Europe first, US next and a comprehensive restructuring of a New Financial World Order next weekend. Is this the end of Bretton Woods II as we know it?
Sun Oct 12, 2008 3:56pm EDT
PARIS, Oct 12 (Reuters) - Leaders of euro zone countries held an emergency meeting on Sunday to decide pan-European measures aimed at propping up the battered financial sector.
Here is the full final statement released after the summit.
DECLARATION ON A CONCERTED EUROPEAN ACTION PLAN OF THE EURO AREA COUNTRIES
1) Financial systems contribute essentially to the well functioning of our economies and are therefore a necessary prerequisite for growth and a high level of employment. Millions of depositors have trusted their wealth to our financial institutions. The consequences of the current financial market crisis jeopardize the crucial economic role of the financial system.
2) Since the beginning of the crisis, we have acted to address the challenges posed to our financial system: we have committed ourselves to take decisive action and use all availables tools to support relevant institutions and prevent their failure and effectively acted in several cases ; we have increased transparency and disclosure on banks exposure ; we have enhanced retail deposit guarantee protection.
3) Further concerted action is urgently needed given the persistent problems of bank financing and the contagion from the financial crisis to the real economy.
4) We confirm today our commitment to act together in a decisive and comprehensive way in order to restore confidence and proper functioning of the financial system, aiming at restoring appropriate and efficient financing conditions for the economy. In parallel, Member States agree to coordinate measures to address the consequences of the financial crisis on the real economy, in line with 7th of October Ecofin conclusions. In particular, we welcome the EIB's decision to mobilise 30 billions - to support European SME's and its commitment to step up its ability to intervene in infrastructure projects.
5) As members of the Euro area, we share a common responsibility and have to contribute to a common European approach. We invite our European partners to adopt the following principles so that the European Union as a whole can act in a united manner and avoid that national measures adversely affect the functioning of the single market and the other member States.
This requires European Union and Euro area governments, central banks and supervisors to agree to a coordinated approach aiming at : - ensuring appropriate liquidity conditions for financial institutions ; - facilitating the funding of banks, which is currently constrained ; - providing financial institutions with additional capital ressources so as to continue to ensure the proper financing of the economy ; - allowing for an efficient recapitalisation of distressed banks; - ensuring sufficient flexibility in the implementation of accounting rules given current exceptional market circumstances; - enhancing cooperation procedures among European countries. In the current exceptional circumstances, we stress the need for the Commission to continue to act quickly and apply flexibility in state aid decisions, continuing to uphold the principles of the single market and of the state aid regime.
Ensuring appropriate liquidity conditions for financial institutions.
6) We welcome the recent decision by the European Central Bank and other Central Banks in the world to cut their interest rates.
7) We also welcome the decisions by the European Central Bank to improve the conditions for the refinancing of banks and to provide more longer term funding. We look forward to Central Banks considering all ways and means to react flexibly to the current market environment.
We welcome the intention of the ECB and the Eurosystem to react flexibly to the current market environment, in particular in considering to further improve its collateral framework with regard to the eligibility of commercial paper. Facilitating the funding of banks, which is currently constrained.
8) With a view to complementing the actions taken by the European Central Bank in the interbank money market, the Governments of the Euro Area are ready to take proper action in a concerted and coordinated manner to improve market functioning over longer term maturities. The objective of such initiatives should be to address funding problems of liquidity constrained solvent banks.
We welcome the initiatives put forward in some member states to facilitate medium term funding of banks notably through purchase of high quality assets or through swaps of government securities. The worsening of financial conditions in the last four weeks requires additional coordinated actions.
To this aim, Governments would make available for an interim period and on appropriate commercial terms, directly or indirectly, a Government guarantee, insurance, or other similar arrangements of new medium term (up to 5 years) bank senior debt issuance. Depending on domestic market conditions in each country, actions could be targeted at some specific and relevant types of debt issuance.
In all cases, these actions will be designed in order to avoid any distortion in the level playing field and possible abuse at the expense of non beneficiaries of these arrangements. As a consequence: - the price of those instruments will reflect at least their true value with respect to normal market conditions ; - all the financial institutions incorporated and operating in our countries and subsidiary of foreign institutions with substantial operations will be eligible, provided they meet the regulatory capital requirements and other non discriminatory objective criteria ; - Governments may impose further conditions for the beneficiaries of these arrangements, including conditions to ensure an adequate support to real economy; - the scheme will be limited in amount, temporary and will be applied under close scrutiny of financial authorities, until December 31 2009.
While acting quickly as required by circumstances, we will coordinate in providing these guarantees as significant differences in national implementation could have a counter-productive effect, creating distortions in the global banking markets. We will also work in cooperation with the European Central Bank so as to ensure consistency with the management of liquidity by the Eurosystem and compatibility with the operational framework of the Eurosystem. Providing financial institutions with additional capital ressources so as to continue to ensure the proper financing of the economy.
9) So as to allow financial institutions to continue to ensure the proper financing of the Eurozone economy, each Member State will make available to financial institutions Tier 1 capital, e.g. by acquiring preferred shares or other instruments including non dilutive ones. Price conditions shall take into account the market situation of each involved instution. Governments commit themselves to provide capital when needed in appropriate volume while favouring by all available means the raising of private capital. Financial institutions should be obliged to accept additionnal restrictions, notably to preclude possible abuse of such arrangements at the expense of non beneficiaries.
10) Given the exceptional market circumstances, we urge national supervisors, in accordance with the spirit of Basel 2 rules, to implement prudential rules also with a view to stabilising the financial system. Allowing for an efficient recapitalisation of distressed banks.
11) Governments remain committed to support the financial system and therefore to avoid the failure of relevant financial institutions, through appropriate means including recapitalization. In doing so, we will be watchful regarding the interest of taxpayers and ensure that existing shareholders and management bear the due consequences of the intervention. Emergency recapitalisation of a given institution shall be followed by an appropriate restructuring plan.
Ensuring sufficient flexibility in the implementation of accounting rules given current exceptional market circumstances.
12) We welcome the recent initiatives of the Commission regarding conclusions of the 7th October Ecofin regarding the classification of financial instruments by banks between their trading and banking books, notably to ensure a level playing field with our competitors.
Under the current exceptional circumstances, financial and non-financial institutions should be allowed as necessary to value their assets consistently with risk of default assumptions rather than immediate market value which, in illiquid markets may no longer be appropriate.
We ask the competent autorities to take the next steps within the coming days. Enhancing cooperation among European countries.
13) In such circumstances, efficient crisis management requires constant and immediate monitoring. We will therefore set up and strengthen procedures allowing the exchange of information between our Governments, the President of the European Council, the President of the European Commission, the President of the European Central Bank and the President of the Eurogroup. We look forward the European Council on next Wednesday to setting up a mecanism to improve crisis managment between European countries.
14) The Ecofin Council with the support of the Commission and in cooperation with the European Central Bank will report in due time to the European Council on the implementation of these decisions.
© Thomson Reuters 2008. All rights reserved. Users may download and print extracts of content from this website for their own personal and non-commercial use only. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters and its logo are registered trademarks or trademarks of the Thomson Reuters group of companies around the world.
Thomson Reuters journalists are subject to an Editorial Handbook which requires fair presentation and disclosure of relevant interests.
The much needed leadership comes from Europe. Makes one wonder why we didnt see such leadership here. I guess we're too worried to mention recapitalization to large banks in the US since we couldnt have their shareholders suffering. Unless ofcourse the markets do the government job for us. Does the US government honestly not know which banks are insolvent but that Europe does? Volcker - you're needed. Not next year in February - NOW! I guess the sequence of events is supposed to be Europe first, US next and a comprehensive restructuring of a New Financial World Order next weekend. Is this the end of Bretton Woods II as we know it?
Monday, October 6, 2008
Changing Battlegrounds....NC, MO, IN
Never thought I would be typing this. The new battleground states for the election now apparently are: North Carolina, Missouri and Indiana!!! OMG WTF????
Apparently Colorado, Ohio, Pennsylvania, Florida and Virginia are all trending DEM from the latest polling as per www.fivethirtyeight.com
Can you say HOOCODANODE?????
Me thinks a large Obama victory is in the cards....with a month to go. Stay tuned!
Apparently Colorado, Ohio, Pennsylvania, Florida and Virginia are all trending DEM from the latest polling as per www.fivethirtyeight.com
Can you say HOOCODANODE?????
Me thinks a large Obama victory is in the cards....with a month to go. Stay tuned!
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