Thursday, November 13, 2008

>American Financial Turmoil.A new TWIST!!

Nearly everywhere you look, another massive corporation is announcing staggering losses and begging Washington for billions to avoid bankruptcy.

GM needs $50 billion more ...

Fannie and Freddie could need $100 billion more ...

AIG gets $150 billion refinancing ...

PLUS Congress has a NEW $100-billion-plus stimulus package on the way!

Q: Where will it all end?

A: In the greatest orgy of USA government borrowing in recorded history!

General Motors: $25 billion wasn’t enough — needs $50 billion more to survive! GM’s sales are down 20% in a year. Its share price is down nearly 90% — from $31.14 a year ago to $3.36 at yesterday’s close.

The last time GM stock was this low, Harry Truman was in the White House, and Elvis Presley was in grammar school. And now, analysts are warning that America’s largest automaker may soon be worth zero.
American International Group (AIG): $150 billion refinancing announced yesterday!

First, the Fed gave AIG an $85 billion line of credit in a failed attempt to save America’s largest insurer.

When that failed to work, the Fed added $38 billion more through its borrowing facility.

And when the company continued racing towards failure, the Fed agreed to buy more billions of AIG’s toxic commercial paper

Despite the $100 billion already spent to bail out Fannie, the company has revealed that it lost a staggering $29 billion in the third quarter — an announcement that means America’s largest mortgage lender will probably need untold billions more to avoid a total shut-down.

A new twist!!!

WASHINGTON — The Treasury Department on Wednesday officially abandoned the original strategy behind its $700 billion effort to rescue the financial system, as administration officials acknowledged that banks and financial institutions were as unwilling as ever to lend to consumers.

But with a little more than two months left before President Bush leaves office, Treasury Secretary Henry M. Paulson Jr. is hoping to put in place a major new lending program that would be run by the Federal Reserve and aimed at unlocking the frozen consumer credit market.

The program, still in the planning stages, would for the first time use bailout funds specifically to help consumers instead of banks, savings and loans and Wall Street firms.

Treasury officials said they hoped to invest about $50 billion from the bailout fund into the new loan facility, with the aim of helping companies that issue credit cards, make student loans and finance car purchases.

As envisioned, the Treasury would put up about 5 percent of the money that a company would use for lending and private investors would put up perhaps 20 times that much by buying bonds issued by the new program.

Despite the mind-boggling amount of money that Congress has authorized the Treasury to spend — $350 billion immediately, and another $350 billion that Congress would approve under a fast-track procedure — Mr. Paulson is running short of money and time.

This new twist in bailout strategy looks promising lets wait and watch its Result!!!.



Digs said...

Its a Bermuda Triangle type economy in US... put in anything, its vanishing! Whooz eating into it??? Instead as per the sms in circulation, i read other day, for keeping the spend in US itself, spend the amount on US B*#*@S!! hehehe.. The real crux is tax payers whooz money is taken in, dont know in countries like that of ours! Not cos the taxpayers arnt aware, its cos those "jaatwala (Tax payers)" are too low as compared to any developed country! So US walo chabatey raho!! Anyways Rish, nice article, keep posting interesting ones, God Bless.

Anonymous said...

Inspite of such a over construction, the price of the house as per pure demand supply curves intersection should have been much lower than what it is even right now. To bail out the banks and insurers, these guys have helped keep property prices artificially up to unrealistic levels.

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