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The global meltdown in financial market has arrised a series of chain reactions in India, but the impact is not going to be as widespread as earlier imagined. Noted that global financial gaint Lehman ( which was supposed sometime , it can save any bankcrupt companies by giving his valuable advice.. ), but what happen to U.S forth largest bank now itself is on Sale !! yes on Sale... Lehman North America's Investment banking and brokerage is sold to Barclays, now Lehman India operation which is a mainly a back office operation of Lehman based in Mumbai has more than 2,000 employees and handle the investment bank’s information technology and R&D activities is also on sale. Japanese financial services major Nomura Holdings is all set to buy the Indian operations of fallen Lehman Brothers and is likely to retain nearly 2,000 strong workforce.
Similarly, American Insurance Group (AIG), - A Insurance Gaint of America and world is now taken over 70% by Federal Government for a sum of $85 bl. AIG has a business in India also, by special purpose vechicles namely TATA AIG. TATA holds 74% and rest 26% is with AIG. On concerns of TATA AIG future, there is TATA who have given thumbs up to all consumers who were worried about their insurance carried out through this special purpose vehicle (SPV).
Third, and even more significant, is the fact that the conservative approach to reforms in the financial services sector has ensured that the tremors of earthquakes in the US are being felt minimally in India.A meeting a few days ago of the regulators for the pension, insurance and other similar sectors concluded with a sigh of relief and pronouncement that slow and steady opening up of the economy has helped in the long run. This is not to say that capital account convertibility - or making the rupee freely tradable - will not take place. But probably as the regulators have pointed out, this can happen when the economy is at a more mature stage.
Ultimately, therefore, the big losers in the global financial crisis in this country are likely to be the iconic software firms like Infosys, Wipro and Tata Consultancy Services (TCS). Much of their business comes from the erstwhile giant investment banks and that could affect their profitability in the short term. In the medium-to-long term, however, these companies are likely to have greater resilience given their innovative approach in the past to hunting out new markets and customers.
The other area where worries still remain is the pullout of funds by foreign institutional investors from the country's equities and debt markets. The bourses have been showing considerable volatility ever since the news came in about the failure of Lehman and the domino-like effect on other investment banks.
While the Indian stock markets became volatile, they have not crashed as might have been expected initially. They now seem to be stabilizing as safety nets are being created for collapsed banks, like converting Goldman Sachs and JP Morgan into commercial banks while other banks are picking up some entities cheap like the takeover of Wachovia by Wells Fargo.
As far as the US and even Europe are concerned, the ramifications appear to be unending as the scenario is unfolding into the biggest banking crisis in 100 years. Financial institutions considered to have a rock-like stability including Merrill Lynch, Morgan Stanley, JP Morgan and the Lehman Brothers collapsed within days of each.
Some were rescued through various manoeuvres and only Lehman actually declared bankruptcy. Reports reaching here also indicate that many smaller banks are declaring insolvency in the US - a development not being taken note of by the international media which is focusing on the big fish. Thus average people in the US are facing severe hardship. No wonder then the battle is being described as one of Main Street vs Wall Street.
U.S. Senate approved a revised $700 billion rescue package for the House of Representatives , following the House's rejection on earlier version. This bill , approves government to buy bad assest from financial institution due to record forcloser. Senate passed this vote on 74-25, senators authorized the Treasury secretary Mr. Henry Paulsonto buy bad assets from financial's books, allowed the Federal Deposit Insurance Corp. (FIDC) to raise its deposit-insurance cap to $250,000 from $100,000, extended several tax breaks and required government agencies to modify troubled mortgages.
Republicans changed their mind on Historic fall on DOW of 778 points drop on the reaction of first Vote Out. That bill was defeated on House's. Republcans were opposing that Bill and asking for some modification. One of the House of Representatives said Interviews : " The big drop'' in the Dow Index ``really had a chilling effect on a lot of our members and a lot of their constituents "The dollar rose against the euro, approaching a one-year high, after the Senate approval, bolstering expectations the U.S. will act faster than Europe to address the seizure in credit markets. The dollar advanced to $1.3880 per euro at 8:51 a.m. in London, from $1.4009 late yesterday in New York.
The most sweeping change is language to raise the limit for insured bank deposits sought by the FDIC, which asked to raise the capital temporarily to $250,000 from $100,000. This was designed to attract votes of some members of Congress who said that little was being done for Main Street.
The Senate also sweetened the measure for Republicans by authorizing the government's purchase of troubled assets with a $149 billion package of tax breaks. They would spare 24 million households from a $62 billion alternative minimum tax and extend $17 billion in benefits to companies that produce alternative energy.
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U.S. House of Representatives on Monday votes against the move of $700 billion rescue plan. US President George Bush pleas addressed a speech on House of Representatives to make sure deal will get enough room to clear. Despite of all negotiation before the final trust vote it failed on Monday afternoon’s vote failed by a margin of 228-205.
This bailout plan will allow government instantly to buy upto $350 billion of US distressed debt held by Wall Street banks and investment banks, with a further $350 billion available lto use later.The government would have held on to the debts for several years, possibly until credit markets settled, house prices recovered and it could sell the debt at a profit.
The U.S. government has already provided $900 billion US in relief as part of the financial crisis, including $85 billion US to buy out troubled insurer AIG and $200 billion US to take over mortgage lenders Fannie Mae and Freddie Mac. Critics of the bailout plan said it would have done too much for Wall Street firms, and too little for the average American people. Alternative plans discussed by lawmakers included having the government provide mortgage relief directly to homeowners, as well as loan guarantees for people at risk of losing their houses to stave off or even reverse a foreclosure.
The Dow Effect
Emerging market stocks dumped by Investor and Traders Monday after the U.S. House of Representatives rejected the proposed $700 billion rescue plan for the financial sector.
Stocks in India, Russia and Brazil -- three of the BRIC heavyweights -- were deeply in the red on Morning Session. The markets in mainland China are closed this week for holidays. In Brazil, the Bovespa index tumbled 9.4%. Russia's RTS stock index tumbled 7.1%. However Indian Market smartly recovred and closed in hefty green.Taking unprecedented steps, the Fed and other major central banks on Monday poured hundreds of billions of dollars of added liquidity into money markets.
Equity strategists at Credit Suisse say $700 billion represents about 12% of mortgages not backed by Freddie Mac or Fannie Mae -- "probably an appropriate amount to ensure markets become more liquid." But they said it was too small, especially compared with the original Resolution Trust Corp. program that rescued savings-and-loans in the late 1980s.
In Europe, financial institutions were also ailing, with the governments of Belgium, the Netherlands and Luxembourg launching a $16.4 billion rescue of Fortis, the Belgian-Dutch bank. In a unexpected move Belgium, France leading Leader Dexia get a help of EU6.4 Billion from the government of Belgium and Franch. This bank was the leading lender on government project. Afer Adding help to Bank the top executives Chairman and CEO was removed from their posts.
The U.K. government said it is nationalizing Bradford & Bingley after investors and lenders lost confidence in the mortgage lender, with its stock market listing canceled shortly before the markets opened.
Also, the Icelandic government said it bought a 75% stake in Glitnir HF, the country's third-largest lender, while a consortium of German financial institutions bailed out real-estate firm Hypo Real Estate.
Credit markets remained under pressure, with the yield on the 3-month Treasury bill -- viewed as the least risky short-term investment, falling to 0.294% from 0.87% late Friday. The yield on the 10-year Treasury note declined to 3.615%.
The dollar rallied against the euro and the British pound, while gold gained and oil futures ended with a loss of more than $10 a barrel.
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Media Report : A media report stating that one of the UK banks Bradford & Bingley is soon going to be nationlised. "Officials from the Treasury and the Financial Services Authority (FSA) have been in talks with executives from the bank in a bid to secure its future," BBC said. On Friday , stock quoting to his lowest rates on History . Bradford & Bingley has seen erosion of its share price over 90 per cent this year and it is down more than 60 percent since the beginning of the month. The bank has high dependence on expensive wholesale funding raising doubts over its prospects as an independent lender.
Quoting Bradford & Bingley spokesman Tony McGarahan, BBC said discussions were taking place and an announcement would be made before the stock market opened tomorrow. Bradford & Bingley would be the second British bank to be nationalised this year after Northern Rock, which came into public ownership in February.
BBC said the bank would be nationalised using the special legislation the Treasury had put through when it took Northern Rock into public ownership earlier this year. The measure is expected be announced on Sunday night or Monday morning.
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Wachovia Corp.'s may face a accusition like Washington Mutual ( WaMu). Suitors may use a style like JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon did last week: Chase waited for regulators to seize WaMu business and they came & buy the best assets and let the government sort out the rest. 
Among Suitors Citigroup Inc., Wells Fargo & Co. and Banco Santander SA are in talks with Wachovia, report from the Wall Street Journal reported yesterday. This is the same constorium who was taking to WaMu to buy its entire system. But Unfortunetly regulators seized the bank two days ago and Chase purchased the best assest in $1.9 billion which is a fraction amount what they were paying in March. Analysts of Goldman Sachs and some other leading Ratings Co beleives that soon North Carolina based - Wachovia will join the league. Regulators may help suitors to purchase the bank by seizing its assest. Later a press release from Regulator desk stated that - " U.S. benefited from seizing and selling WaMu because the Federal Deposit Insurance Corp. didn't have to tap its $45 billion insurance fund. "
Views on WaMu Failure
``WaMu's takeover has proven that there's an easy way, if the FDIC is involved,'' said Sean Egan, president of Egan-Jones in Haverford, Pennsylvania. ``You kick the hell out of the equity holders and bondholders. That may be the new model for bank takeovers.''
Christina Pretto, a spokeswoman for New York-based Citigroup, declined to comment on the Journal's report, as did Santander's Peter Greiff, spokesman for the Spanish bank, and Wells Fargo's Julia Tunis Bernard in San Francisco. Wachovia's Christy Phillips Brown wouldn't comment on the news accounts or on analysts' reports.
Limited Risk
After WaMu's failure -- the biggest in U.S. history -- Dimon said in an interview that the New York-based bank gained ``a fabulous franchise'' while limiting the risk. ``We got this at a price that protects us, where if we were wrong, it still protects us,'' said Dimon, 52.
Wachovia has more resources to draw upon than WaMu did, including its market capitalization of $21.6 billion and assets that rank sixth among U.S. lenders. CEO Robert Steel, 57, the former Treasury official hired this summer to replace Kennedy Thompson, told employees in an e-mail yesterday that Wachovia was ``strong and performing well.'' The bank is more diversified than WaMu, owning the third-biggest U.S. brokerage, plus units in wealth management and corporate and commercial banking, he wrote.
Credit Ratings
Wachovia dropped $3.70 to $10 in New York Stock Exchange composite trading yesterday and lost $1.50 more in extended hours. Yields on Wachovia's bonds soared to 24 percent, from 7.5 percent on Sept. 5, an indication that investors are concerned about default.
Analysts questioned Wachovia's ability to stay independent after seeing loan losses tied to WaMu. JPMorgan is taking on $176 billion in mortgage-related assets and taking writedowns of about $31 billion, the New York bank said. Some of those were option ARM loans, which are prone to default because they let borrowers defer some interest and add it to the principal.
JPMorgan concluded that losses on the loans may equal up to 20 percent of their value, said Sean Ryan, an analyst at Sterne Agee & Leach in New York. Wachovia has $122 billion in option adjustable-rate mortgages.
``If we apply marks similar to those used by JPMorgan in the recent WaMu acquisition, the levels of potential losses would bring Wachovia very close to the threshold of being considered `well-capitalized,' '' Goldman analyst Louise Pitt wrote in a note to investors yesterday. Banks that are less than well-capitalized face curbs on their activities by regulators.
Those potential losses may discourage immediate bids for Wachovia, said Larry Carroll, president of Carroll Financial Associates Inc. in Charlotte, which oversees $1.3 billion.
``If you just wait, it may get you at a much cheaper price and not have to take all the bad stuff,'' he said.
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Just 60 sec of Your time can help Bihar Flood Victims
Just 60 sec of Your time can help Bihar Flood VictimsJust came across an innovative site to help Bihar Flood victims. Shows how one can contribute without actually spending anything or being physically present by spending 60 seconds of one's time. Just have to answer simple questions, and sponsors will pay to the NGO on your behalf. Kindly spread the word. (http://www.helpbihar.in) Answers: Patna,Kosi,25 Lakh people,Drought
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This Friday FTSE ( London Financial Times Index ) , one of the premier exchange of world, surged by 8.84 % after continuous 4 days loss.This is the maximum gain in a single day since 21 Oct ,1987 ( US aftermath ). FTSE faces 10% downward journey from Monday to Thursday.
Index soars on the news of US Government planing to save the financial world by tackling the situation. Further Financial Services Authority ( FSA ) a regulatory body who controls the exchanges in UK , put 29 securities on Do - Not- Short - Sell list until January 16 , 2009. All of the 29 stocks are Financial Stock. After this news FTSE bounced sharply in Friday trade , closed by 8.84% or 431 points .
Read the Part 1 story on US market ... Click here
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US post its biggest gain on 2 day since 1987 (termed as aftermath year)
Posted by Abhishek , on 21st Sept 2008 . @ 12.13 PM IST
Posted by Abhishek , on 21st Sept 2008 . @ 12.13 PM IST
American market posted its rally of 2 day since the crisis of 1987 as government introduced some plans to save world largest economy and market. This week financial dominated S&P 500 Index make the biggest loss in seven year. Financial shares in the S&P 500 plunged 13% in the first three days of the week as Lehman Brothers Holdings Inc. filed for bankruptcy, Merrill Lynch & Co. sold itself and the government seized American International Group Inc., sending the market to its steepest declines since the 2001 terrorist attacks. But during the last two trading day as Government decided to safe the market and retail stakeholder by adding more measures like
* SEC imposes temporary ban on short sales on 799 stocks
* US Treasury to back money market mutual funds .
US Market rallied to covering its losses that is made in the beginning of this week to close in FLAT to the extent. On Thursday ,Wall Street posted its biggest one-day percentage gain since October 2002 -- when the last bull market was born -- after a congressional aide said U.S. Treasury Secretary Henry Paulson has been circulating a proposal to lawmakers that would create an entity to deal with the billions of dollars of bad debt still clogging the financial system.
Biggest Bankruptcy of World
1) Lehman was the fourth-largest U.S. investment bank before it filed the biggest bankruptcy in U.S. history on Sept. 15, smashed to the sub prime-mortgage crisis that this financial gaint helped to create. The firm was forced into bankruptcy after Barclay Plc and Bank of America Corp. abandoned takeover talks and the company lost 94 percent of its market value this year.
2) Merrill Lynch agreed to be bought by Bank of America after its shares plunged 36 percent the prior week. Merrill led gains in the in the S&P 500, climbing 73 percent to $29.50.
3) Goldman Sachs Group Inc. and Morgan Stanley, the only remaining independent brokerages on Wall Street after Lehman's bankruptcy and Merrill's sale, climbed after earlier enduring their steepest one-day sell-offs ever as the nation's three largest pension funds stopped loaning shares to investors betting on the firms' declines. Goldman dropped 16 percent to $129.80 for the week and Morgan Stanley fell 27 percent to $27.21.
4) Washington Mutual - Financial stocks gained 7.4 percent overall. Washington Mutual Inc., the largest U.S. thrift, surged 56 percent to $4.25 on the government's rescue plans and reports four potential bidders may be interested in buying pieces of the company. . We got a report that CITI Financial is also intrested to buy this troubled firm.
5) AIG fell the most in the S&P 500, losing 68 percent to $3.84. The biggest U.S. insurance company was taken over by the government after mortgage-related losses led to credit-rating downgrades that drove the company to the brink of insolvency. The government said it will receive a 79.9 percent stake in return for an $85 billion loan that analysts said may be repaid by liquidating the company. Analyst believe that this amount of $85 billion is not enough and government is need to inject further money on this Insurance Gaint.
The Federal Reserve kept its benchmark interest rate at 2 percent on Sept. 16, citing risks to growth and inflation. The central bank agreed to the AIG loan hours after the decision.
Please refer to our next Article of Rally of 1987 - Part -2 ( EUROPE )
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US president Mr. Bush sought unchecked power from Congress to buy $700 billion in bad mortgage investments from financial companies in next two year. This bill is bought in congress by Treasury Secretary Henry Paulson who aims to solve the credit problem and believes that it would bring the financial system and the world's largest economy to a standstill. The bill would prevent courts from reviewing actions taken under its authority. By adding this $700 billion on the pipeline it will increase the statutory limit on the national debt from $10.6 trillion to $11.3 trillion. This draft not cleared what Government will get in return of helping mortgage companies in this financial turmoil. Bush Administration & Congress is thinking to get conquest early to make market safe.
Posted by Abhishek ,, 21st Sept ,, 2008 .. @ 11.33AM IST
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