Asian markets mostly lower on economic worries
Asian markets were mostly lower on Wednesday as traders displayed concern about economic recovery. Japan's Nikkei 225 Index was off 0.6%, Australia's S&P/ASX 200 Index was down 0.4% and South Korea's Kospi Composite Index was down 1.2%. New Zealand's NZX-50 Index was up 0.5%. The Wall Street Journal (27 Oct.)
Fed may have wasted $13B of taxpayer money on AIG's swaps
The Federal Reserve Bank of New York squandered $13 billion of taxpayers' money when it ordered American International Group to pay Goldman Sachs, Merrill Lynch, Deutsche Bank and other major financial institutions the full face value for derivatives contracts in 2008, according to this analysis. Until the instructions came down from the Fed, AIG had been negotiating for discounts of up to 40 cents on the dollar, Bloomberg News reported. Janet Tavakoli, founder of Tavakoli Structured Finance, said paying full price for the contracts was indefensible. "There's no way they should have paid at par. AIG was basically bankrupt," she said. The Washington Post (28 Oct.)
*if a house costs more than $300,000, then don't you think you should get an interest rate thats less than 5%? Ijiots.
Economists worry about housing-market fluctuations
Government tax credits and artificially low interest rates that drove up house prices for the past three months will end soon, and economists are increasingly worried what will happen next in the housing market. Increasing numbers of defaults and foreclosures have spread far beyond the poorest of Americans to hit middle-income families. Many homeowners still able to make their mortgage payments may be trapped in their current homes for years because their homes' market values have dropped below their mortgage balances. The residential real estate market will be confronted by a severe test this winter, experts say. The New York Times (27 Oct.)
U.K. authority to face criticism for Icelandic bank losses
The U.K. Financial Services Authority will face criticism from members of Parliament for its failure to prevent British investors from suffering heavy losses in investments with Icelandic banks, a member of Parliament said Tuesday. Phyllis Starkey, chairman of the Communities and Local Government Select Committee, said her committee will raise questions about why the FSA allowed local authorities to lose nearly £1 billion ($1.6 billion) in these investments. Iceland is repaying part of the funds owed, but some will never be recovered, auditors said. The Times (London) (28 Oct.)
U.K. moves to break up 3 bailed-out banks, sell assets
The British government reportedly plans to divide up the operating units of three U.K. banks -- Northern Rock, Royal Bank of Scotland and Lloyds -- and sell the parts to create three new financially sound banks. The London newspaper The Independent quoted government sources saying they are "determined" to bring competition into the banking business again. The sell-off of Royal Bank of Scotland and Lloyds could take as long as five years, The Independent reports. The European Commission is expected to give its approval to dividing Northern Rock into two parts, a financially healthy "good bank" and a "bad bank" to be held by the government while distressed and illiquid assets are sold. The Independent (London) (28 Oct.)
*Timmy getting some balls? We'll see.
Geithner says fight for financial reform is "a war of necessity"
Treasury Secretary Timothy Geithner says Wall Street is well aware that further financial reform is needed to avert future financial crises. Geithner told a financial services conference that the system is still too fragile. "It's a war of necessity, not a war of choice. And it's a just war," Geithner said. Reuters (27 Oct.)
*all the world over. Expect a pretty healthy retracement in this stock market.
South Africa sees record budget deficit
South Africa's finance minister says the country's budget deficit is expected to widen by March to a level not seen since 1961. As tax revenues are expected to decline during the period, the government will have to borrow to finance the deficit. "These are significant increases from previous estimates and represent a material deterioration in South Africa's strongest anchor," said Nick Chamie, head of global emerging markets research at RBC Capital Markets. Bloomberg (28 Oct.)