Major banks don’t fail, they just fade in another.
Plan to Rescue Citigroup Begins to Emerge
By ERIC DASH and GRETCHEN MORGENSON 5:12 PM ET
Federal regulators were considering a new rescue for Citigroup on Sunday, a step that could mark a third leg of the government’s broader efforts to bolster the nation’s financial industry, according to people briefed on the plan.
Under the proposal, the government would shoulder losses at Citigroup if those losses exceeded certain levels, according to these people, who spoke on the condition that they not be identified because the plan was still under discussion.
If the government should have to take on the bigger losses, it would receive a stake in Citigroup. The banking giant has been brought to its knees by gaping losses on mortgage-related investments.
If approved, the plan could serve as a model for other banks, heralding another shift in the government’s morphing financial rescue. The Treasury Department initially proposed buying troubled assets from banks but then reversed course and began injecting capital directly into financial institutions.
The plan for Citigroup was still under discussion on Sunday afternoon, and it was unclear exactly how the arrangement might work. One question is how Citigroup and the government would determine the level of losses that the bank itself must bear before the government steps in. Another is whether any additional government money for Citigroup, which has already received $25 billion under the initial rescue plan, would come from the $700 billion industry bailout that Congress approved in October or from other sources, like the Federal Reserve or the Federal Deposit Insurance Corporation.
Regulators were debating various terms of the arrangement on Sunday, including whether the government would receive preferred stock or warrants, which are instruments that give holders the right to buy stock. Preferred stock would be more beneficial to taxpayers because Citigroup would pay dividends on those shares; warrants would be more attractive to Citigroup’s existing shareholders, since they would not immediately dilute the value of their investments as much as preferred stock.
Jim Sinclair’s Commentary
All that is required is the reinstatement of the up trick rule and enforcement of the rules against naked short selling.
New push to curb short-selling
November 24, 2008
COMPANIES whose stocks came under heavy attack last week from short-sellers are hoping that a meeting of international sharemarket regulators will bring some respite, having so far unsuccessfully lobbied Canberra and the market watchdog in Australia.
The chairman of the US Securities and Exchange Commission, Christopher Cox, said on Friday he would convene a telephone conference of international regulators tonight to discuss "urgent regulatory issues" dealing with the sharemarket meltdown, which sent America’s S&P 500 down 8.4 per cent last week and prompted a 7.5 per cent slump on the Australian sharemarket.
"In addressing turbulent market conditions, it is essential not only that regulators act against securities law violations, including abusive short-selling, but also that there be close co-ordination among international markets to avoid regulatory gaps and unintended consequences," Mr Cox said.
The talks would also look at whether recent steps to reduce manipulative short-selling, such as temporary bans, were effective.
The meeting comes after industry groups and companies targeted by short-sellers in Australia started lobbying the chairman of the Australian Securities and Investments Commission, Tony D’Aloisio, and the Minister for Corporate Law, Nick Sherry, last week.
Jim Sinclair’s Commentary
This is the definition of out of control.
Obama readies with massive US rescue package
Anne Davies, Washington
November 24, 2008 – 7:49AM
President-elect Barack Obama is considering a possible $1.1 trillion economic stimulus package in a bid to create or save 2.5 million jobs as soon as he takes office on January 20.
Senior Democrats today revealed they were pushing Mr Obama to massively up the ante on the $US61 billion rescue plan already rejected by the Senate and President George Bush.
The emergency package is being worked on by Mr Obama’s economic team and senior members of Congress, as economists warn that America now risks the far more serious prospect of a very deep recession and falling prices, similar to the Great Depression.
A formal lannouncement on the package is expected today on Monday US time.
Over the weekend several senior Democrats delivered broad hints about the scale and scope of the new President’s plans, in a round of television interviews designed to reassure the US markets before they open on Monday.
Charles Schumer, the senior Democrat from New York and Joint Economic Committee chairman, told US ABC television that the stimulus package needed to be between $US500 billion ($800 billion) and $US700 billion ($A1.1 triillion).
Jim Sinclair’s Commentary
Recall your history classes and "Manifest Destiny." These early tests of the new President can get ugly.
Russia president, warships to Venezuela to counter U.S.
Sun Nov 23, 2008 2:24pm EST
By Frank Jack Daniel
CARACAS (Reuters) – Warships, nuclear power, arms sales and perhaps cooperation on oil prices — Russia’s President Dmitry Medvedev is in Venezuela this week with an alarming sounding list to wave under Washington’s nose.
The U.S. government dismisses the importance of Medvedev’s visit on Wednesday to meet Venezuelan President Hugo Chavez and the deployment of several Russian warships for joint military exercises with Venezuelan forces in the Caribbean. It says Russia’s weak navy is no threat and downplays its rivals’ blooming friendship.
But OPEC-member Venezuela is Russia’s first firm ally in the Americas since the Cold War and Moscow sees ties to Chavez as a way to answer U.S. influence close to its borders in the Caucasus.
Russia’s aim to grow its Latin American presence may be hurt by falling oil prices and Barack Obama’s U.S. election win, which could help the United States regain influence lost in the region during the unpopular presidency of George W. Bush.
Still, Chavez has made a career of opposing the U.S. "empire" and he welcomes a heavyweight partner like Russia as an alternative to ties with his main oil client Washington.
Jim Sinclair’s Commentary
It is out of control.
Events Turning Violent In Iceland
by Eric deCarbonnel
Saturday, November 22, 2008
The Guardian reports that Icelanders demand PM resignation, clash with police:
Icelanders demand PM resignation, clash with police
Reuters, Saturday November 22 2008
REYKJAVIK, Nov 22 (Reuters) – Thousands of Icelanders demonstrated in Reykjavik on Saturday demanding the resignation of Prime Minister Geir Haarde and Central Bank Governor David Oddsson for failing to stop a financial meltdown in the country.
It was the latest in a series of protests in the capital since the financial meltdown that crippled the island’s economy.
Hordur Torfason, a well-known troubadour in Iceland and the main organiser of the protests, said the protests would continue until the government stepped down.
"They don’t have our trust and they are no longer legitimate," Torfason said as the crowds gathered in the drizzle before the Althing, the Icelandic parliament.
A separate group of 200-300 people gathered in front of the city’s main police station demanding the release of a young protester being held there, Icelandic media reported.
Police in riot gear used pepper spray to drive back an attempt to free the protester during which several windows at the police station were shattered. The protester was later released after a fine he had been sentenced to pay was paid.