NY Times: Recapitalization Plan Being Considered
Calculated Risk — From the NY Times: U.S. May Take Ownership Stake in Banks Having tried without success to unlock frozen credit markets, the Treasury Department is considering taking ownership stakes in many United States banks to try to restore confidence in the financial system ... Treasury officials say the just-passed $700 billion bailout bill gives them the authority to inject cash directly into banks that request it. Such a move would quickly strengthen banks’ balance sheets and, officials hope, persuade them to resume lending. In return, the law gives the Treasury the right to take ownership positions in banks, including healthy ones. The proposal resembles one ...

U.S. Debt Too Big for National Debt Clock
Econ Video —

TED Spread at Record
Calculated Risk — Here is the TED Spread from Bloomberg . The TED spread hit a record 4.13 this morning. This is far above the highs reached during the previous waves of the credit crisis. Note: the TED spread is the difference between the LIBOR interest rate and the three month T-bill. Usually the TED spread is less than 0.5%. The higher the spread, the greater the perceived credit risks (compared to "risk free" treasuries). From Bloomberg: Libor Dollar Rate Jumps to Highest in Year; Credit Stays Frozen The cost of borrowing in dollars for three months in London soared to the highest level this year as coordinated interest-rate reductions worldwide failed to revive ...

Good Morning
Calculated Risk — I will have you know I had a cup of coffee this morning. For the first time in about a month. I am sure that any of you long-term caffeine addicts who have ever had to quit cold turkey for an extended period of time will understand why this fact demands celebration. For me, for the rest of my days, "PPI" will no longer mean Producer Price Index--who cares about that?--but Proton Pump Inhibitor, which is a wonder drug . At any rate, while I still lack the key qualities of a decent blogger--energy, wit, intelligence, stamina, the attention span God gave a rutabaga--I wanted you to know that I'm still here and in the process of crawling out from under a nasty bout of ...

Iceland seizes Kaupthing, Closes Stock Exchange
Calculated Risk — “What we have learned from this whole exercise over the last few years is that it is not wise for a small country to try to take a leading role in international banking .” Geir Haarde, Prime Minister of Iceland From The Times: Iceland seizes Kaupthing as meltdown continues ...

Reuters: Treasury may recapitalize banks this month
Calculated Risk — From Reuters: Treasury may capitalize banks by end October: source The U.S. Treasury Department plans to start directly injecting capital in U.S. banks as soon as the end of October in exchange for passive investment stakes according to a financial policy source familiar with Treasury Secretary Henry Paulson's thinking. ... White House spokeswoman Dana Perino said later on Thursday that Paulson is "actively considering" capital injections into troubled U.S. banks. ... The source familiar with Paulson's thinking said Treasury was working "extremely fast" to put together a capital injection plan ... the injections would likely be made public ... Here we go ...

More Cliff Diving Today: S&P Off 40% from Peak
Calculated Risk — The Dow Jones Industrial Average is now below 8900 8800 8700. The S 500 is off 40% from the peak of last October. Krugman says : Stock prices are, however, the least of our worries. The money markets are frozen; the TED spread is 4.14%. (CR: now 4.23 ) G7 meeting tomorrow, IMF-World Bank over the weekend. Now is the time for major action — an announcement of coordinated capital injections, liquidity measures, and more. If we’ve had nothing except vague assurances by Monday ...

Citi: Will Not Ask that Wells Fargo-Wachovia merger be enjoined
Calculated Risk — From the WSJ: Text of Citi Statement on Wachovia Deal Citi announced today that it had reached no agreement with Wells Fargo following several days of discussions about matters related to Wachovia. The dramatic differences in the parties' transaction structures and their views of the risks involved made it impossible to reach a mutually acceptable agreement. ... Citi believes that it has strong legal claims against Wachovia, Wells Fargo and their officers, directors, advisors and others for breach of contract and for tortious interference with contract. Citigroup plans to pursue these damage claims vigorously on behalf of its shareholders. However, Citigroup ...

NATIONAL DEBT
Angry Bear — http://www.youtube.com/watch?v=QYUAi-g_WIk&eurl=http://calculatedrisk.blogspot.com/2008/10/more-cliff-diving-today-s-off-40-from.htmllican. National debt now exceeds 10 trillion dollars. The national debt ...

Trade Deficit and Oil
Calculated Risk — Something a little different ... Tomorrow morning the Department of Commerce will release the trade deficit report for August. Some people might be looking at this report to see the impact of falling oil prices and slowing export growth. It is helpful to remember that oil prices peaked in July, but there is a lag between spot price and import prices. Therefore I expect import oil prices to be a little higher for August than July. U.S. Oil Prices ...

Gordon Brown: Follow Our Lead
Calculated Risk — Before the G7 meets in Washington tomorrow, British Prime Minister Gordon Brown writes in The Times: We must lead the world to financial stability . Excerpts: The stability and restructuring programme for Britain that we announced this week is the first to address at one and the same time the three essential components of a modern banking system - sufficient liquidity, funding and capital. So the Bank of England has pledged to double the amount of liquidity it provides to the banks; we have guaranteed new lending between the banks so that we can get the banks lending to each other again; and at least £50 billion will be made available to recapitalise our ...

Dr. Evil and Mini-Me
Calculated Risk — Blogroll: I'm going to try to limit the sites on the blogrolls below going forward. Here are the critieria for inclusion: 1) be an active housing or economics analysis site. Active means at least a few posts per week. There should be more analysis than selling of a product or service. And the sites should be oriented towards housing or economics (as opposed to say stock trading or other topics) 2) Provide a link to my blog on the front page. If you'd like to have your site added, please send me an email with "Blogroll" in the subject. Please specify the site title and URL, and the topic (housing or economics). Please be patient - I only add sites once a month or ...

Financial Crisis: A Global Response?
Calculated Risk — Mark Landler and Edmund Andrews write in the NY Times: Nations Weighing Global Approach as Chaos Spreads The United States and Britain appear to be converging on a similar blueprint for stemming the financial chaos sweeping the world, one day before a crucial meeting of leaders begins in Washington that the White House hopes will result in a more coordinated response. The British and American plans, though far from identical, have two common elements according to officials: injection of government money into banks in return for ownership stakes and guarantees of repayment for various types of loans. Here is the proposal from Prime Minister Gordon Brown in ...

Volcker: We Have the Tools to Manage the Crisis
Calculated Risk — Former Fed Chairman Paul Volcker writes in the WSJ: We Have the Tools to Manage the Crisis Excerpts: Today, the financial crisis has reached a critical point. .... For months, the real economy, apart from housing, had not been much affected by the developing crisis. Now, a full-scale recession appears unavoidable. ... Those are facts. They are the culmination of economic imbalances, a succession of financial bubbles and financial crises that have been building for years. It's no wonder that confidence in markets, banks, and financial management has been badly eroded. Without effective action, fear might take hold, threatening orderly recovery. Fortunately, ...

President Bush to Speak at 10 AM ET
Calculated Risk — Blogroll: I'm going to try to limit the sites on the blogrolls below going forward. Here are the critieria for inclusion: 1) be an active housing or economics analysis site. Active means at least a few posts per week. There should be more analysis than selling of a product or service. And the sites should be oriented towards housing or economics (as opposed to say stock trading or other topics) 2) Provide a link to my blog on the front page. If you'd like to have your site added, please send me an email with "Blogroll" in the subject. Please specify the site title and URL, and the topic (housing or economics). Please be patient - I only add sites once a month or ...

Market Take from Cartoonist Eric G. Lewis
Calculated Risk — Blogroll: I'm going to try to limit the sites on the blogrolls below going forward. Here are the critieria for inclusion: 1) be an active housing or economics analysis site. Active means at least a few posts per week. There should be more analysis than selling of a product or service. And the sites should be oriented towards housing or economics (as opposed to say stock trading or other topics) 2) Provide a link to my blog on the front page. If you'd like to have your site added, please send me an email with "Blogroll" in the subject. Please specify the site title and URL, and the topic (housing or economics). Please be patient - I only add sites once a month or ...

Report: Germany Considering Bank Recapitalization Plan
Calculated Risk — Blogroll: I'm going to try to limit the sites on the blogrolls below going forward. Here are the critieria for inclusion: 1) be an active housing or economics analysis site. Active means at least a few posts per week. There should be more analysis than selling of a product or service. And the sites should be oriented towards housing or economics (as opposed to say stock trading or other topics) 2) Provide a link to my blog on the front page. If you'd like to have your site added, please send me an email with "Blogroll" in the subject. Please specify the site title and URL, and the topic (housing or economics). Please be patient - I only add sites once a month or ...

CNBC: Treasury Preparing Term Sheet for Recapitalization
Calculated Risk — From CNBC: Radical Measures May Be In The Wings ... Treasury Secretary Henry Paulson is prepared to take extraordinary steps through the extensive authority granted to him under emergency rescue legislation. With the legislation’s main mechanism—an auction system to purchase bad mortgage-based securities—still weeks away from implementation, Paulson is now expediting plans to inject capital into banks, CNBC has learned. According to senior government officials, the plan is to offer a term sheet, offering capital injections to all banks. An announcement won't happen for several days.

Credit Spreads: Still Getting Worse
Calculated Risk — The TED spread (the difference between the LIBOR interest rate and the three month T-bill) has increased to a record 4.65 today. Completely off the recent charts! Here is the TED Spread from Bloomberg . A2P2 Spread Long Term Here is a graph via Macroblog that shows a long term view of the TED spread ( doesn't include the recent spike to 4.65 ). There are a few earlier periods when the TED spread was higher than today (like during the '73-'75 recession). But 4.65 is pretty close to the all time high. And the following graph is the A2/P2 spread from the Fed's commercial paper report . The A2/P2 Spread hit 459 bp yesterday. When the A2/P2 ...

G-7 Update: Italy say communiqué "too weak"
Calculated Risk — From Bloomberg: G-7 Meets on Crisis as Italy Splits Over `Weak' Draft Finance ministers and central bankers from the Group of Seven nations met for crisis talks in Washington amid an unprecedented public split over what to say in their joint statement. The draft communiqué under consideration is ``too weak'' and fails to reflect the gravity of the financial turmoil, Italian Finance Minister Giulio Tremonti told reporters in Washington before the talks began. ``We won't sign it.'' While Britain has pushed for a coordinated agreement to guarantee loans between banks, one official from a G-7 member said it was unlikely the G-7 would endorse their proposal. ...

Bank Failures: Number 14 and 15
Calculated Risk — It's Friday. From the FDIC : Main Street Bank, Northville, Michigan, was closed today by the Michigan Office of Financial and Insurance Regulation, and the Federal Deposit Insurance Corporation (FDIC) was named receiver. To protect the depositors, the FDIC approved the assumption of all the deposits of Main Street Bank, by Monroe Bank & Trust, Monroe, Michigan. ... Main Street Bank had total assets of $98 million in total assets and $86 million in total deposits as of October 7, 2008. Monroe Bank & Trust has agreed to pay a total premium of 1 percent for the failed bank's deposits. In addition, Monroe Bank & Trust will purchase approximately $16.9 ...

G-7 Communiqué: Just Generalities
Calculated Risk — G-7 Finance Ministers and Central Bank Governors Plan of Action Washington— The G-7 agrees today that the current situation calls for urgent and exceptional action. We commit to continue working together to stabilize financial markets and restore the flow of credit, to support global economic growth. We agree to: 1. Take decisive action and use all available tools to support systemically important financial institutions and prevent their failure. 2. Take all necessary steps to unfreeze credit and money markets and ensure that banks and other financial institutions have broad access to liquidity and funding. 3. Ensure that our banks and other major financial ...

Paulson: Will Buy Equity "Soon"
Calculated Risk — From Bloomberg: Paulson Says Will Buy Bank Equity `Soon as We Can' U.S. Treasury Secretary Henry Paulson said the U.S. will buy equity ``as soon as we can'' in banks and other financial institutions to restore market stability and revive economic growth. The Treasury is ``working to develop a standardized program that is open to a broad array of financial institutions,'' Paulson said at a press conference ... ``We're going to do it as soon as we can do it and do it properly and do it effectively and right,'' Paulson said. ``Trust me, we are not wasting time; people are working around the clock to deal with this.'' Paulson was also asked if Morgan Stanley ...

GM to Acquire Chrysler?
Calculated Risk — Blogroll: I'm going to try to limit the sites on the blogrolls below going forward. Here are the critieria for inclusion: 1) be an active housing or economics analysis site. Active means at least a few posts per week. There should be more analysis than selling of a product or service. And the sites should be oriented towards housing or economics (as opposed to say stock trading or other topics) 2) Provide a link to my blog on the front page. If you'd like to have your site added, please send me an email with "Blogroll" in the subject. Please specify the site title and URL, and the topic (housing or economics). Please be patient - I only add sites once a month or ...

Charlie Rose: A Discussion with Paul Volcker
Calculated Risk — Blogroll: I'm going to try to limit the sites on the blogrolls below going forward. Here are the critieria for inclusion: 1) be an active housing or economics analysis site. Active means at least a few posts per week. There should be more analysis than selling of a product or service. And the sites should be oriented towards housing or economics (as opposed to say stock trading or other topics) 2) Provide a link to my blog on the front page. If you'd like to have your site added, please send me an email with "Blogroll" in the subject. Please specify the site title and URL, and the topic (housing or economics). Please be patient - I only add sites once a month or ...