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Vocabulary > Economy > Bailout
Dave Brown
The Independent
9
October 2008
http://www.independent.co.uk/opinion/the-daily-cartoon-760940.html?ino=51
L to R:
Chancellor Alistair Darling, British Prime Minister Gordon Brown,
three 'fat cats'.
Jerry Holbert
Boston, MA, The Boston Herald
Cagle
1 December 2008
R: Uncle Sam = USA
bail out
October 2008
http://www.reuters.com/article/ousiv/idUSTRE49A36O20081013
Ireland bailout
November 2010 - April 2011
http://www.guardian.co.uk/business/ireland-bailout
http://www.guardian.co.uk/world/2011/mar/31/ireland-new-bailout-euro-crisis
http://www.guardian.co.uk/business/2010/nov/29/ireland-bailout-fails-to-excite-markets
bailout /
recapitalisation UK
October 2008
http://www.guardian.co.uk/commentisfree/2010/nov/22/ireland-bailout-eu-investors-bondholders
http://www.guardian.co.uk/business/2008/oct/13/marketturmoil-creditcrunch
http://www.guardian.co.uk/business/2008/oct/13/banking-banks
http://image.guardian.co.uk/sys-files/Politics/documents/2008/10/13/reutersspeech13102008.pdf
bailout / bail-out USA
November 2008
http://www.reuters.com/article/ousiv/idUSTRE4AO4QY20081125
http://www.reuters.com/article/idUSTRE4AO69T20081125
bailout / bail-out USA
September / October 2008
http://www.nytimes.com/2008/11/14/opinion/14brooks.html?em
http://www.usatoday.com/news/washington/2008-09-29-bailout-congress_N.htm
http://www.reuters.com/article/politicsNews/idUSTRE48S6BD20080929
http://www.guardian.co.uk/commentisfree/2008/sep/29/wallstreet.useconomy
http://www.reuters.com/article/idINTRE48S01420080929?virtualBrandChannel=10112
http://graphics8.nytimes.com/packages/pdf/business/20080928bailout_text.pdf
http://www.reuters.com/article/ousiv/idUSTRE48R0BP20080928
http://www.usatoday.com/money/economy/2008-09-28-bailout-deal_N.htm
http://www.guardian.co.uk/business/2008/sep/25/wallstreet.banking
http://www.reuters.com/article/ousiv/idUSN1945959820080920
http://www.usatoday.com/news/washington/2008-09-20-financial-rescue_N.htm
keep
... afloat
American
International Group Inc. AIG
USA
American
International Group was the largest insurance company in the United States
before it suddenly collapsed in September 2008 under the weight of bad bets it
made insuring mortgage-backed securities.
The company was bailed out by the Federal Reserve, but even after an initial
infusion of $85 billion, losses continued to grow.
The later rescue packages brought the total to $182 billion, making it the
biggest federal bailout in United States history.
http://topics.nytimes.com/top/news/business/companies/american_international_group/index.html
http://topics.nytimes.com/top/news/business/companies/american_international_group/index.html
Ireland bailout fails to calm nervy markets
• FTSE 100 down 2%; Dow loses 1%
• Euro slides to two-month low against US dollar
• Cost of insuring Spanish and Portuguese debt hits record high
Monday 29 November 2010
19.35 GMT
Guardian.co.uk
Jill Treanor and Julia Kollewe
This article was published on guardian.co.uk at 19.35 GMT on Monday 29 November
2010.
A version appeared on p28 of the Main section section of the Guardian on Tuesday
30 November 2010.
It was last modified at 01.30 GMT on Tuesday 30 November 2010. It was first
published at 10.40 GMT on Monday 29 November 2010.
Stocks fell on both sides of the Atlantic, the euro tumbled, and the cost of
borrowing for Ireland, Spain and Portugal jumped today, as details of the
republic's €85bn (£72bn) bailout failed to quell anxiety that the crisis in the
eurozone was deepening.
Amid speculation that the European authorities may be left with little option
but to embark on large-scale quantitative easing to try to bolster sentiment,
Ireland's borrowing costs shot as high as 9.6% as the terms of its bailout by
the International Monetary Fund and European Union were digested by investors.
"The bottom line is that the financial markets are unimpressed, and that's the
most generous description," Neil MacKinnon, global macro strategist at VTB
Capital told Associated Press. "The crisis rumbles on."
Only two shares in the FTSE 100, Barclays and HSBC, ended the day in positive
territory as the blue-chip index closed below 5600 for the first time since 1
October, down 2% at 5550.
The Dow Jones industrial average fell 39.51 points to 11,052.49, and the euro
slid to a new two-month low against the dollar of $1.3065 amid concerns about
the long-term future of the decade-old single currency.
The cost of borrowing for the peripheral eurozone countries stayed stubbornly
high, with Portugual above 7% and Spain above 5%, as speculation focused on the
next indebted country which might need financial help. Italy endured its biggest
one day rise in borrowing costs for a decade.
The cost of insuring Portuguese debt against default rose to a record high after
Nouriel Roubini, economics professor and chairman of Roubini Global Economics,
urged Lisbon to take international assistance. "Like it or not, Portugal is
reaching the critical point," Roubini told the Portuguese newspaper Diário
Económico. "Perhaps it could be a good idea to ask for a bailout in a
preventative manner."
Ireland's bailout failed to dent fears of contagion across the eurozone despite
rallying cries by France's economy minister Christine Lagarde and Germany's
finance minister Wolfgang Schäuble, who both insisted Portugal would not need
help. Andrew Lim, head of financials research at Matrix investment bank, said:
"The Irish bailout doesn't solve the euro problem … We are looking at Portugal,
then Spain next."
The fragility in the markets led to speculation that the European Central Bank
will delay attempts to begin withdrawing funds for banks at its meeting on
Thursday, even though the €35bn earmarked for Ireland's banks was intended to
wean them off the ECB's life support.
Analysts said although the Ireland bailout had been accompanied by plans for new
ways to rescue troubled eurozone countries after 2013, when the current
emergency schemes run out, investors had been left confused. It was still not
clear in what circumstances bondholders would be expected to share the losses of
countries that were allowed to reschedule their debt after 2013 – in effect
defaulting.
"Given the lack of clarity about what constitutes the appearance of insolvency,
and what type of restructuring might occur in such a case, markets are likely to
remain wary of holding government debt issued by other troubled eurozone
countries like Portugal and Spain," said Ben May, European economist at Capital
Economics.
"With huge political frictions still clearly in place within the region, fears
of a future break-up of the region look set to remain, placing further downward
pressure on the euro."
The bailout for Ireland is intended to ensure that neither the country nor its
banks will default on their debt. The decision by the authorities to ensure that
the possibility of default was reduced was initially welcomed. Gary Jenkins,
head of fixed income research at Evolution Securities, said: "This is not the
time to inject panic into the banking sector."
Greece, the first eurozone country to be bailed out, was today given until 2021
to repay its €110bn loan from the IMF and EU, rather than 2015.
Greece's finance minister George Papaconstantinou said: "We have a grace period
of four years and a repayment period of seven years.
"The decision is very important, it opens the way to return to markets earlier
than expected."
Ireland bailout fails to
calm nervy markets, G, 29.12.2010,
http://www.guardian.co.uk/business/2010/nov/29/ireland-bailout-fails-to-excite-markets
$700 Billion Is Sought for Wall Street in Vast Bailout
September 21, 2008
The New York Times
By DAVID M. HERSZENHORN
WASHINGTON — The Bush administration on Saturday formally proposed a vast
bailout of financial institutions in the United States, requesting unfettered
authority for the Treasury Department to buy up to $700 billion in distressed
mortgage-related assets from the private firms.
The proposal, not quite three pages long, was stunning for its stark simplicity.
It would raise the national debt ceiling to $11.3 trillion. And it would place
no restrictions on the administration other than requiring semiannual reports to
Congress, granting the Treasury secretary unprecedented power to buy and resell
mortgage debt.
“This is a big package, because it was a big problem,” President Bush said
Saturday at a White House news conference, after meeting with President Álvaro
Uribe of Colombia. “I will tell our citizens and continue to remind them that
the risk of doing nothing far outweighs the risk of the package, and that, over
time, we’re going to get a lot of the money back.”
After a week of stomach-flipping turmoil in the financial system, and with
officials still on edge about how global markets will respond, the delivery of
the administration’s plan set the stage for a four-day brawl in Congress.
Democratic leaders have pledged to approve a bill but say it must also include
tangible help for ordinary Americans in the form of an economic stimulus
package.
Staff members from Treasury and the House Financial Services and Senate banking
committees immediately began meeting on Capitol Hill and were expected to work
through the weekend. Congressional leaders are hoping to recess at the end of
the week for the fall elections, after approving the bailout and a budget
measure to keep the government running.
With Congressional Republicans warning that the bailout could be slowed by
efforts to tack on additional provisions, Democratic leaders said they would
insist on a requirement that the administration use its new role, as the owner
of large amounts of mortgage debt, to help hundreds of thousands of troubled
borrowers at risk of losing their homes to foreclosure.
“It’s clear that the administration has requested that Congress authorize, in
very short order, sweeping and unprecedented powers for the Treasury secretary,”
the House speaker, Nancy Pelosi of California, said in a statement. “Democrats
will work with the administration to ensure that our response to events in the
financial markets is swift, but we must insulate Main Street from Wall Street
and keep people in their homes.”
Ms. Pelosi said Democrats would also insist on “enacting an economic recovery
package that creates jobs and returns growth to our economy.”
Even as talks got under way, there were signs of how very much in flux the plan
remained. The administration suggested that it might adjust its proposal,
initially restricted to purchasing assets from financial institutions based in
the United States, to enable foreign firms with United States affiliates to make
use of it as well.
The ambitious effort to transfer the bad debts of Wall Street, at least
temporarily, into the obligations of American taxpayers was first put forward by
the administration late last week after a series of bold interventions on behalf
of ailing private firms seemed unlikely to prevent a crash of world financial
markets.
A $700 billion expenditure on distressed mortgage-related assets would roughly
be what the country has spent so far in direct costs on the Iraq war and more
than the Pentagon’s total yearly budget appropriation. Divided across the
population, it would amount to more than $2,000 for every man, woman and child
in the United States.
Whatever is spent will add to a budget deficit already projected at more than
$500 billion next year. And it comes on top of the $85 billion government rescue
of the insurance giant American International Group and a plan to spend up to
$200 billion to shore up the mortgage finance giants Fannie Mae and Freddie Mac.
At his news conference, Mr. Bush also sought to portray the plan as helping
every American. “The government,” he said, “needed to send a clear signal that
we understood the instability could ripple throughout and affect the working
people and the average family, and we weren’t going to let that happen.”
A program to help troubled borrowers refinance mortgages — along with an $800
billion increase in the national debt limit — was approved in July. But
financing for it depended largely on fees paid by Fannie Mae and Freddie Mac,
which have been placed into a government conservatorship.
Representative Barney Frank, Democrat of Massachusetts and chairman of the House
Financial Services Committee, said in an interview that his staff had already
begun working with the Senate banking committee to draft additions to the
administration’s proposal.
Mr. Frank said Democrats were particularly intent on limiting the huge pay
packages for corporate executives whose firms seek aid under the new plan,
raising the prospect of a contentious battle with the White House.
“There are going to be federal tax dollars buying up some of the bad paper,” Mr.
Frank said. “They should accept some compensation guidelines, particularly to
get rid of the perverse incentives where it’s ‘heads I win, tails I break even.’
”
Mr. Frank said Democrats were also thinking about tightening the language on the
debt limit to make clear that the additional borrowing authority could be used
only for the bailout plan. And he said they might seek to revive a proposal that
would give bankruptcy judges the authority to modify the terms of primary
mortgages, a proposal strongly opposed by the financial industry.
Senator Charles E. Schumer, Democrat of New York, who attended emergency
meetings with the Treasury secretary, Henry M. Paulson Jr., and the Federal
Reserve chairman, Ben S. Bernanke, on Capitol Hill last week, described the
proposal as a good start but said it did little for regular Americans.
“This is a good foundation of a plan that can stabilize markets quickly,” Mr.
Schumer said in a statement. “But it includes no visible protection for
taxpayers or homeowners. We look forward to talking to Treasury to see what, if
anything, they have in mind in these two areas.”
Ms. Pelosi’s statement made clear that she would push for an economic stimulus
initiative either as part of the bailout legislation or, more likely, as part of
the budget resolution Congress must adopt before adjourning for the fall
elections. Such a plan could include an increase in unemployment benefits and
spending on infrastructure projects to help create jobs.
Some Congressional Republicans warned Democrats not to overreach.
“The administration has put forward a plan to help the American people, and it
is now incumbent on Congress to work together to solve this crisis,” said
Representative John A. Boehner of Ohio, the Republican leader.
Mr. Boehner added, “Efforts to exploit this crisis for political leverage or
partisan quid pro quo will only delay the economic stability that families,
seniors and small businesses deserve.”
Aides to Senator Barack Obama of Illinois, the Democratic presidential nominee,
said he was reviewing the proposal. In Florida, Mr. Obama told voters he would
press for a broader economic stimulus.
“We have to make sure that whatever plan our government comes up with works not
just for Wall Street, but for Main Street,” Mr. Obama said. “We have to make
sure it helps folks cope with rising prices, and sparks job creation, and helps
homeowners stay in their homes.”
Senator John McCain of Arizona, the Republican nominee, issued a statement
saying he, too, was reviewing the plan.
“This financial crisis,” Mr. McCain said, “requires leadership and action in
order to restore a sound foundation to financial markets, get our economy on its
feet, and eliminate this burden on hardworking middle-class Americans.”
If adopted, the bailout plan would sharply raise the stakes for the new
administration on the appointment of a new Treasury secretary.
The administration’s plan would allow the Treasury to hire staff members and
engage outside firms to help manage its purchases. And officials said that the
administration envisioned enlisting several outside firms to help run the effort
to buy up mortgage-related assets.
Officials said that details were still being worked out but that one idea was
for the Treasury to hold reverse auctions, in which the government would offer
to buy certain classes of distressed assets at a particular price and firms
would then decide if they were willing to sell at that price, or could bid the
price lower.
Mindful of a potential political fight, Mr. Paulson and Mr. Bernanke held a
series of conference calls with members of Congress on Friday to begin
convincing them that action was needed not just to help Wall Street but everyday
Americans as well.
Republicans typically supportive of the administration said they were in favor
of approving the plan as swiftly as possible.
Senator Mitch McConnell of Kentucky, the Republican leader, said in a statement,
“This proposal is, and should be kept, simple and clear.” The majority leader,
Senator Harry Reid, Democrat of Nevada, said that the bailout was needed but
that Mr. Bush owed the public a fuller explanation.
Some lawmakers were more critical or even adamantly opposed to the plan. “The
free market for all intents and purposes is dead in America,” Senator Jim
Bunning, Republican of Kentucky, declared on Friday.
It is far from clear how much distressed debt the government will end up
purchasing, though it seemed likely that the $700 billion figure was large
enough to send a reassuring message to the jittery markets. There are estimates
that firms are carrying $1 trillion or more in bad mortgage-related assets.
The ultimate price tag of the bailout is virtually impossible to know, in part
because of the possibility that taxpayers could profit from the effort,
especially if the market stabilizes and real estate prices rise.
Lehman Can Sell to Barclays
A federal bankruptcy judge decided early Saturday that Lehman Brothers could
sell its investment banking and trading businesses to Barclays, the big British
bank, the first major step to wind down the nation’s fourth-largest investment
bank.
The judge, James Peck, gave his decision at the end of an eight-hour hearing,
which capped a week of financial turmoil.
The deal was said to be worth $1.75 billion earlier in the week but the value
was in flux after lawyers announced changes to the terms on Friday. It may now
be worth closer to $1.35 billion, which includes the $960 million price tag on
Lehman’s office tower in Midtown Manhattan.
Lehman Brothers Holdings Inc. on Monday filed the biggest bankruptcy in United
States history, after Barclays PLC declined to buy the investment bank in its
entirety.
Reporting was contributed by Jeff Zeleny from Daytona Beach, Fla.,
and Michael
Cooper, Carl Hulse, Stephen Labaton and David Stout from Washington.
$700 Billion Is Sought
for Wall Street in Vast Bailout, NYT, 21.9.2008,
http://www.nytimes.com/2008/09/21/business/21cong.html
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