Financial troubles seen as deepening
Fazle Rashid | Wednesday, 16 July 2008
THE nation is broke. This perhaps succinctly describe the current economic woes of America, the largest and most vibrant economy of the world. Peter Peterson, commerce secretary under Richard Nixon is planning to spend $1.0 billion of his own money to enlighten the Americans about the present state of health of the US economy.
The Bush administration has sent a bail-out proposal of opening a credit line for $300 billion. The government proposal will provide a surge of capital to cash strapped companies mainly Fannie Mae and Freddie Mac, two biggest mortgage banks now reeling under the mountain of crushing debts.
The government plan is to calm a jittery and nervous market.
The desperate worry over the health of the country's huge financial
institutions "reflects a reality that has reshaped major spheres of
American life". Much of the private money that once made its way into the mortgage industry has disappeared leaving the government to fill the void.
Troubles, instead of subsiding, are growing rapidly. There are more than 150 small and medium banks that could tumble in course next 12 months. Many banks will shut down branches or seek mergers. The debacle, the greatest collapse of the American financial institutions since the depression, prompted a government bail-out that would cost the tax payers $125 billion, experts said.
As has been stated that the common woe is due to collapse of the real
estate market and souring mortgage loans. The Securities and Exchange
Commission (SEC) is smelling a rat behind the present rut. The SEC feels that the manipulators are active behind the crisis. It will launch a serious hunting. The SEC has warned broker-dealers, hedge funds and investment advisers to refrain from making wild speculation and spreading rumours. Lehman Brothers was a victim of false rumour that precipitated a 20 per cent drop in the price of its shares. The SEC settled a securities-fraud and market speculation charges against a trader. Traders denied that they plant false information.
The Federal Reserve Chairman Ben Bernanke will appear before Senate Banking Committee Tuesday and House Financial Service Committee the day next to discuss the monetary policy. Banks announcing losses have exceeded $400 billion. Many fear the figure will soon cross a trillion mark, New York Times said. Experts say that many banks did not understand the intricacies of mortgage lending. Their ignorance has proved to be expensive.
The Bush administration has sent a bail-out proposal of opening a credit line for $300 billion. The government proposal will provide a surge of capital to cash strapped companies mainly Fannie Mae and Freddie Mac, two biggest mortgage banks now reeling under the mountain of crushing debts.
The government plan is to calm a jittery and nervous market.
The desperate worry over the health of the country's huge financial
institutions "reflects a reality that has reshaped major spheres of
American life". Much of the private money that once made its way into the mortgage industry has disappeared leaving the government to fill the void.
Troubles, instead of subsiding, are growing rapidly. There are more than 150 small and medium banks that could tumble in course next 12 months. Many banks will shut down branches or seek mergers. The debacle, the greatest collapse of the American financial institutions since the depression, prompted a government bail-out that would cost the tax payers $125 billion, experts said.
As has been stated that the common woe is due to collapse of the real
estate market and souring mortgage loans. The Securities and Exchange
Commission (SEC) is smelling a rat behind the present rut. The SEC feels that the manipulators are active behind the crisis. It will launch a serious hunting. The SEC has warned broker-dealers, hedge funds and investment advisers to refrain from making wild speculation and spreading rumours. Lehman Brothers was a victim of false rumour that precipitated a 20 per cent drop in the price of its shares. The SEC settled a securities-fraud and market speculation charges against a trader. Traders denied that they plant false information.
The Federal Reserve Chairman Ben Bernanke will appear before Senate Banking Committee Tuesday and House Financial Service Committee the day next to discuss the monetary policy. Banks announcing losses have exceeded $400 billion. Many fear the figure will soon cross a trillion mark, New York Times said. Experts say that many banks did not understand the intricacies of mortgage lending. Their ignorance has proved to be expensive.