Word: banking
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...flexibility under the legislation, and could ultimately act as a kind of sovereign wealth fund, injecting cash for equity, as famed investor Warren Buffett recently did with Goldman Sachs. Or the Feds could avoid carrying equity by lending money to financial institutions willing to buy up questionable bank assets at discounted rates. But first the Treasury seems ready to dip into its $700 billion to establish a reverse auction set-up to ensure that the government doesn't pay too high, or too low, a price for the distressed securities. The auction system will likely take at least a month...
...market had initially been buoyed by decisions that occurred before it opened - both the Fed's decision to buy the short-term debt, called commercial paper, that companies issue to fund expenses like payroll and inventory, and the Reserve Bank of Australia's surprising decision to cut its official interest rate by a full percentage point...
...have to see things work now before they'll believe them." In particular, Low pointed out, investors may want to be sure that this year's bailout shows results - unlike last year's Master Liquidity Enhancement Conduit, which was an attempt to solve the subprime crisis by three private banks (Citigroup, JP Morgan Chase and Bank of America) using private money - essentially what Treasury Secretary Hank Paulson hopes to do now with public funds. Within months, however, the Conduit was abandoned when no investors were willing to buy the toxic mortgages. And so the government bailout was devised...
...Chairman Ben Bernanke, testifying on Capital Hill today, of a possible rate cut did not help. His prognosis that slow growth in the American economy, not inflation, is now the Reserve's primary concern only added bad news to a day that included fallout from yesterday's after-hours Bank of America announcement that it will need to cut its dividend and raise $10 billion in capital. The bank, which has acquired Countrywide Financial and plans to do the same with Merrill Lynch, dropped almost 25% on the announcement. Morgan Stanley shares also plummeted 25% on rumors, which the company...
...That's because credit markets, which affect the ability of businesses and governments to borrow to fund day-to-day operations, continue to tighten in Asia as banks become more nervous about lending. In Hong Kong, the one-month interbank lending rate has doubled in the past month to 4%. Central banks are trying to pump liquidity into financial markets to avert a credit crunch. India on Monday cut the amount of cash that banks must deposit with the central bank in an attempt to loosen credit. "Credit markets are quite global," says Kirby Daley, senior strategist at financial services...