The World Newser is World News' daily blog. Here, you'll find our staff's thoughts on the day's news and the way we build our broadcast. Plus, we'll share reports from our team of correspondents in the field, as well as producers behind-the-scenes.
RECENT POSTS
- Going Rogue, Selling High
- What One Man 200 Miles Above Earth is Thankful For Today
- Clem's Chronicles: Toyota Recall/Afghan Speech/State Dinner Crashers
- Charlie Gibson...On this Thanksgiving
- Quotes of the Day: 'It is my intention to finish the job'
- Start Your Shopping Engines
- The Hajj and Women's Dress
- Clem's Chronicles: Afghanistan/WH State Dinner/Holiday Travel
- Photos: White House State Dinners Through the Years
- Are We Becoming A Nation of Know-Nothings?
- Quotes of the Day: 'President Obama has the information he wants... to make his decision'
- Clem's Chronicles: Jobs/Afghanistan/Health Care Reform/Deficit
WORLD NEWSER CATEGORIES
MONTHLY ARCHIVES
« Previous | Main | Next »
History-Making Week for U.S. Financial Community
September 13, 2008 4:42 PM
ABC News' Betsy Stark reports: It may be hard to notice through a hurricane the size of Texas and the media blizzard surrounding Sarah Palin, but history has been unfolding in the nation's financial system.
Who could have imagined that the government would take over the nation's two biggest mortgage companies, Fannie Mae and Freddie Mac, only to be orchestrating what will either turn out to be the sale or the liquidation of a 158-year-old investment bank the very next weekend? Who could have imagined that, in the same week, the nation's largest savings and loan, Washington Mutual, would fall to a $2 stock, casting its solvency in doubt? And who could have imagined that in the very same week, investors would be panic-selling the stock of Merrill Lynch, the nation's largest retail broker, and dumping shares of the insurance giant AIG, all while they worry and whisper about other financial giants that once seemed invincible, including the likes of Wachovia and GE Capital.
It is somewhat reassuring that the stock market held its own through this enormous turmoil. After a big rally Monday and a big selloff Tuesday, it mostly moved sideways through the Lehman Brothers drama. But investor confidence is on a razor's edge. The government is signaling it's done using taxpayer money to bail out Wall Street cowboys now paying for the outsized risks that earned them outsized profits. And if it is unsuccessful in pressuring private bankers into a deal to buy Lehman, we could wake up Monday morning watching what happens when a major investment bank with a maze of global counter-parties is allowed to fail. It is unlikely to be pretty.
We're not accustomed to seeing banks fail, not really big banks. But economists I talk to say in the bursting of this housing bubble, it's both inevitable and therapeutic that a bloated banking system, which binged on bad debt, is compelled by market forces to consolidate. The government will not restore confidence in a system that relies on confidence -- as well as credit -- by rescuing one institution after another after another. It's not good economics and it's not good politics. Taxpayers would be justified in objecting: many of them are losing money on their homes and their 401-k's and they're not getting bailed out. There is a big 'moral hazard' in privatizing profit and socializing risk.
I have asked the question several times of the experts I have spoken with over this historic week: can you reassure me that the U.S. financial system is essentially safe and sound? The answer I hear is 'yes.' Some of it is the safety in numbers. There are nearly 8500 banks in the U.S., according to the FDIC. They have $13.3 trillion in assets and $8.6 trillion in deposits. How many are in trouble? Officially, there are 117 on the problem list. Fully 98 percent of the banks it monitors are "well-capitalized." Of course, the FDIC covers commercial banks and savings institutions. The investment banks are another story. Here we can hopefully derive some comfort from knowing a lot of the bad news is already out there--that's what those $500 billion in write-downs of bad assets is all about.
But it's not over. To borrow the metaphor of the hurricane now obscuring these extraordinary events, we might even be in the eye of the storm. And there's no question that's a scary place to be.
September 13, 2008 in Economy | Permalink | Share | User Comments (101)
You can follow this conversation by subscribing to the comment feed for this post.
Actually, unless i'm crazy, It's 12 year as a senator of some sort, NOT 10 years.
Posted by: rashred | Sep 13, 2008 10:37:29 PM
Perot once warned us of that sucking sound of money leaving the country...
Its' gone, only we haven't felt it yet...
Thanks to all those jerks in office that supported deregulation and outsourcing...they have betrayed America.
Posted by: P.S.Off | Sep 13, 2008 10:41:25 PM
My thing is they are doing all these massive bailouts yet paying all the company execs millions when they are taking over. what the heck are they giving those crooks money to walk away time to put them in jail for fraud, waste, and abuse of the peoples money.
Posted by: James | Sep 13, 2008 10:49:00 PM
Who could of imagined these banks failing? Ron Paul has been screaming at you guys about this stuff and you spent too much time trying to prop-up McCain. Ron Paul says it's going to get worse. I believe him. Report on that.
Posted by: Dude | Sep 13, 2008 11:12:14 PM
We Ron Paul supporters got our money out early because we knew he was telling us the truth about the phony fiat scam money system. Foreigners are hip to game and won't buy any more paper debt. This is why they want the oil so bad. Without the oil reserves we'll crumble. The race is on.
Posted by: Money | Sep 13, 2008 11:28:36 PM
We are in for a rough ride while we liquidate this debt, that is if the fed allows it or it is forced upon us from outside entities.
Posted by: Ben Straub | Sep 13, 2008 11:33:42 PM
The debate has to be between Obama supporters and Ron paul supporters. Those are the only people with minds left. Anybody supporting McBush is disqualified for completely disregarding the facts, and falling into the very "identity politics" they claim to hate so much.
I am for Obama, but the Ron Paul supporters have strong arguments.
Ron Paul deserves to be heard by the media, and he is being ignored. And that, from an Obama campaign supporter.
Posted by: Wayne Kensey | Sep 13, 2008 11:45:00 PM
Wayne Kensey - We need to open up the debates to 3rd party candidates. Certainly people like Paul or Nader would spew truth in the face of the unrealistic and bankrupting policies of the top 2 candidates. Barr, Baldwin and McKinney would add a little extra. If it just Obama and McCain get ready to hear all sorts of junk about reverends, lipstick, bridge to nowhere, and the like.
Posted by: Ben Straub | Sep 13, 2008 11:49:32 PM
John McCains son knew about the bank failures....why do you think he quit 60 days before the bank he ran FAILED! Google it....
Don't blame me....Ron Paul told us all about this long ago....
This is just the start people!
Posted by: John #1 | Sep 13, 2008 11:51:48 PM
I am all for opening up the debate to 3rd party candidates. Obama has a lot of traction because he was for real change, and not a typical Democrat. Other parties should be allowed onto the stage as well. Nader has been a spoiler in past races though, and has contributed little (in my view). Ron Paul is asking all the right questions, and made a lot of on-target predictions.
Barr is a real Patriot as well, and McKinney tried to exposed the voting scandals...
Posted by: Wayne Kensey | Sep 13, 2008 11:53:41 PM
Fabian - Thanks for the post. I am no economist, actually I am an radar engineer type, but I do believe the interventionalist foreign policy and the idea that massive amounts of debt is a good thing has got to go. Let's just say Paul curred my apathy. By the way his district just got hammered by Ike. Wonder if he rode it out down there in Texas.
Posted by: Ben Straub | Sep 13, 2008 11:56:10 PM
Wayne Kensey - What Nader does is point out the corporate fascist state that exist in this country. I realize you are a dem so you may want Nader to go away, but he would really bring change whereas Obama....well let's just say the jury is still out. I do want Obama over McCain, if not for three reasons: diversity, it is the dems turn to screw things up even more, and foreign policy. The fundamental roles of government need to change. That I do believe.
Posted by: Ben Straub | Sep 13, 2008 11:59:47 PM
Both parties cause problems. The Bush administration has been asking a democratic congress to do something about the mortgage mess for years. They wouldn't. Why? Lobbyists for some of these big lenders, which donate to their political campaigns.
Obama and McCain say they'd like to get rid of lobbyists. How are they going to do that? Somehow, we all must make our voices heard so they will at least try.
Posted by: mo | Sep 14, 2008 12:03:48 AM
My question to Ron Paul supporters is why hasn't Paul endorsed Barr? They have similar philosophies, but the appearance is that they are at odds with each other. If Paul supported Barr, they could both gain some traction. Obama got where is he by building alliances.
Thats why I am still supporting Obama. Paul has good ideas, but seems to want the stage alone. I hope I am wrong...
Posted by: Wayne Kensey | Sep 14, 2008 12:05:02 AM
Wayne - because barr is egoistic and praises bush ... he has changed his mind to try to divert the ron paul supporters
he decided to not to attend paul's conference with the other 3 3rd party candidates ..
the libertarian party is pending removing barr from their nomination ticket
Posted by: Fabian | Sep 14, 2008 12:06:58 AM
ron paul deserves the stage after what they did to him after he spoke truth
Posted by: Fabian | Sep 14, 2008 12:07:31 AM
Fabian - Good for you. I wish I was 19 again. Actually 35 is not so bad. I do agree with you that our country is filled with people that are ignorant. They are spooned fed what the mainstream media feeds them which is usually spun and watered down. My big things are the toxic food supply and the drug company lobby which makes me want to puke. If you want to fix the health care crisis, people need to stop stuffing toxicity down their throats. Oh well, that is another discussion entirely. As far as economics goes: I do know that debt is bad, and according to the GAO, in about 30 years, the national debt will exceed GDP. That is damn scary.
Posted by: Ben Straub | Sep 14, 2008 12:09:44 AM
Wayne Kensey - I believe Paul is has multiple loyalties, and can't choose one over the other. Paul's focus right now is to open up the debates to more views. A 3rd party win in my opinion would be the greatest thing that could happen to this country.
Posted by: Ben Straub | Sep 14, 2008 12:13:38 AM
Ben - lol well you would expect them to destroy our country .. because thats exactly what the domestic enemies of the constitution want
and look even how stupid our government is ... i recall a news article getting the situation straight ..
osama bin laden isn't a retarded guy ... he knows very well that he couldnt military challend the U.S.
there was an article written that osama claimed to destroy the U.S. financially ... and he is doing very well ... we are doing everything he wants us to do
Posted by: Fabian | Sep 14, 2008 12:20:26 AM
I believe Ron Paul and all the hard money economists when they say it's going to get worse.
People, you need to google and learn about the dangers of a central bank and fractional reserve banking. The Federal Reserve is a private bank that basically controls our government. The bankers own us. Period.
Watch the online movie "Money as Debt"
Posted by: sean | Sep 14, 2008 12:22:47 AM
Post a comment
