August 23rd, 2011
During the 2008 financial crisis, when the nation's banking system seemed on the verge of collapse, President George W. Bush authorized a $700 billion bailout of the financial industry. The U.S. Treasury implemented that program, known as TARP, in an effort to stave off economic catastrophe.
At the same time, and in the years that followed, the Federal Reserve was undertaking its own rescue operation, in the form of private, previously undisclosed loans to banks and other institutions -- lending as much as $1.2 trillion, nearly twice the amount of the Treasury bailout, according to a data analysis performed by Bloomberg News and published on Monday.
The scope of the Fed's private lending had previously only been guessed at, but figures obtained under the Freedom of Information Act by Bloomberg News show that the nation's central banker issued loans to more than 300 institutions between August 2007 and April 2010, including over 100 loans of $1 billion or more.
While the Fed's loans likely helped to prevent a complete implosion of the global banking system, analysts say they fear the loans may have contributed to an atmosphere of complacency on Wall Street. Banks that received emergency cash infusions during the crisis may now believe the Fed will always be there to bail them out of trouble, the thinking goes.
"It is a classic case of moral hazard," Dimitri Papadimitriou, president of the Levy Economics Institute of Bard College, told The Huffington Post.
The Federal Reserve itself had argued that the details of its emergency loans should be kept out of the public eye, claiming that the reputations of the firms involved could suffer if they were seen to be taking money from the government in order to stay afloat. Many of the banks that borrowed from the Fed had previously appealed to the Supreme Court to keep those records secret.
However, an invocation of the Freedom of Information Act forced the Fed to release more than 29,000 pages of documents, revealing the extent to which the financial sector relied on Federal Reserve.
Given the extraordinary size of the loans, the public has a right to know what happened, said David Jones, an executive professor at the Lutgert College of Business at Florida Gulf Coast University.
"It's completely valid at some point to say, 'Who did the borrowing?'" Jones told The Huffington Post. "It was appropriate, under this special set of circumstances, to divulge the information."
Among the largest borrowers were Bank of America, which borrowed $91.4 billion; Goldman Sachs, which was in debt for $69 billion; JPMorgan Chase, which borrowed $68.6 billion; Citigroup, which borrowed $99.5 billion and Morgan Stanley, the biggest borrower of all, to which the Fed loaned $107 billion.
In addition, the Fed issued sizable loans to a number of foreign banks, including the Royal Bank of Scotland, which borrowed $84.5 billion; Credit Suisse Group, which borrowed $60.8 billion and Germany's Deutsche Bank, to which the Fed lent $66 billion. Nearly half of the 30 largest borrowers were European firms, according to Bloomberg News.
While the amount of lending that took place is remarkable, some argue that the Fed's error was not in issuing the loans, but rather in doing so without setting stronger policy reform conditions for the money.
Dean Baker, co-director of the Center for Economic and Policy Research, told The Huffington Post that Federal Reserve Chairman Ben Bernanke could have attached a "quid pro quo" to the emergency loans -- stipulating, for example, that the money would only come through if the banks agreed to do business in a less risky way going forward.
"This is the moment all the banks were on their backs," Baker said. "The Fed ran to the rescue and got nothing in return."
A previous disclosure in December found that the Fed issued $9 trillion in low-interest overnight loans to banks and other Wall Street companies during the crisis. The $1.2 trillion figure represents the peak amount of outstanding loans, which occurred on December 5, 2008, according to Bloomberg News.
Some critics contend that while the Fed was right to support the financial sector, the government didn't do enough to help ordinary citizens who were also seeing their wealth evaporate during the crisis.
Papadimitriou told The Huffington Post that the Fed issued many of its biggest loans during the Bush administration, and that "they didn't appear to have any difficulty supporting the financial sector, but very much difficulty supporting the real sector, households."
Consumer spending suffered and unemployment spiked in the wake of the financial crisis, and the economy remains weak today. Output is low, consumer confidence is down and millions are still out of work -- factors that have some economists worried about the possibility of a double-dip recession.
The TARP bailout, led by the Treasury, was the subject of much popular ire when it occurred, since it was seen as a case of the government throwing money at the financial sector at the expense of everyday Americans. Similarly, the Fed's $1.2 trillion in emergency loans were primarily aimed at keeping major financial institutions on their feet.
"One would assume banks are too interconnected, you have to help all of them," Papadimitriou said. "But if you take households in total, they are also all interconnected. They are also too big to fail."
August 22nd, 2011
NewsChannel 36 Staff and Associated Press
CHARLOTTE, N.C. -- Hurricane Irene cut power to more than a million people in Puerto Rico, downing trees and flooding streets on Monday, and forecasters warned it could be a major storm as it threatens Florida and South Carolina by the end of the week.
"This could be a pretty significant storm for the Carolina coast," said Brad Panovich of the First Warn Storm Team.
The U.S. National Hurricane Center projected that Irene could grow into a Category 3 hurricane with winds of 115 mph (184 kph) over the Bahamas on Thursday. And it may carry that force northwest along Florida's Atlantic coast and toward a possible strike on South Carolina, though the forecasters warned that by the weekend, the storm's path could vary significantly from the current projection.
Folks along Carolina coast urged to prepare
A hurricane warning was issued Monday for the Turks and Caicos Islands and the southeastern Bahamas. Officials in Charleston, South Carolina, warned residents to monitor Irene closely. It has been six years since a hurricane hit the South Carolina coast, said Joe Farmer of the state Emergency Management Division.
"The storm is tracking north of all the big islands in the Caribbean now. This is significant because now the storm will have little interference as it moves towards the U.S. This also means a shift in the track east squarely puts the Carolinas in the strike zone," said Panovich.
Hurricane Irene centered about 70 miles (115 kilometers) northeast of Punta Cana, Dominican Republic late Monday morning and it was moving toward the west-northwest at 13 mph (20 kph). It had maximum sustained winds of about 80 mph (130 kph), the Hurricane Center reported.
prepare now along the entire South and North Carolina coasts. Preparing for the worst and hoping for the best is the goal here," Panovich said. "Get your supplies and plan together today through Wednesday. Thursday we’ll know who need to activate that plan. If you wait you’ll be fighting crowds for supplies late week."
Hurricane Irene heads toward Hispaniola
In Puerto Rico, crews were out clearing streets and assessing the damage but the governor and other officials gave no indication when power would be restored. Schools, most government offices and many businesses remained closed. Flights were expected to resume at the international airport in San Juan by midmorning.
Dozens of people in San Juan sought emergency shelter ahead of Irene and authorities evacuated 150 tourists from the outlying islands of Culebra and Vieques as the storm approached.
The storm entered through the southeast coastal town of Humacao, but emergency management regional director Orlando Diaz said the damage seemed to be less than he feared.
"We thought things were going to be a bit more tragic," he said. "I was surprised that we didn't see the amount of rain I expected."
Irene had previously churned through St. Croix in the U.S. Virgin Islands, where more than half of the inhabitants are still without power, said Christine Lett, emergency management spokeswoman.
In the Dominican Republic, officials assured residents they had food available for 1.5 million people if needed. Also, soldiers and emergency management crews evacuated dozens of residents from high-risk areas along the southern coast.
"We have taken all precautions," presidential spokesman Rafael Nunez said.
Many stores in the capital of Santo Domingo closed Sunday even as people bought last-minute items like flashlights.
The international airport and others remained open late Monday morning, although dozens of flights had been canceled.
Irene is expected to lash the northeastern region of the Dominican Republic for up to 15 hours, local meteorologist Miguel Campusano said.
In the popular tourist city of Punta Cana, emergency crews prepared for the storm but have not taken any special measures, said Candy Gomez, spokeswoman for the Punta Cana resort.
Tracking the storm
The Hurricane Center said the main impediment to the storm's progress over the next couple of days will be interaction with land. If Irene passes over Hispaniola's mountains or over parts of eastern Cuba, the storm could weaken more than currently expected.
"It's really from the east coast of Florida all the way to the Outer Banks of North Carolina that we need to keep an eye on," Panovich said.
The storm isn't expected to impact the United States until later this week and things could change. There is the possibility that it could turn miss the Carolina coast.
"But the thing that worries me is as the storm reaches the Bahamas, the atmosphere is ripe for intensification. The bigger the storm gets, the harder it is to move," Panovich said.
August 22nd, 2011
Wall Street Journal
Standard & Poor's President Deven Sharma is leaving the credit-rating firm at the end of the year, the company said Monday night.
Mr. Sharma will step down as president on Sept. 12 and be succeeded by Douglas Peterson, chief operating officer of Citigroup Inc.'s Citibank unit. Mr. Sharma will remain at S&P through the end of the year in an advisory capacity, working with McGraw-Hill Cos. Chairman, President and Chief Executive Harold "Terry" McGraw III as the company explores a separation of its education business.
Mr. Sharma's departure is unrelated to the firm's controversial downgrade earlier this month of long-term U.S. debt, a person familiar with the matter said, and has been underway since the beginning of the year.
In November 2010, S&P split into two pieces—the credit-ratings service and McGraw-Hill Financial. Mr. Sharma, 55 years old, made the decision to leave S&P after he oversaw that split. Mr. Sharma was "ready for new challenges" after that move, Mr. McGraw said in a statement Monday night. The company has been searching for a successor for Mr. Sharma since then, Mr. McGraw said.
A person familiar with the matter said Mr. Sharma is interested in possibly being a chief executive in the future. Mr. Sharma wants "to run a public company as opposed to just be president of a division," the person said. Mr. Sharma also wants to gain board seats at some publicly held concerns, the person added.
Initially, Mr. Sharma didn't want to stay through the end of the year in an advisory position because "he wanted to move on as quickly as possible," the person said. Mr. Sharma apparently changed his mind after getting advice that a gradual exit would ease his job search and remove any appearance that S&P forced him out, that person said.
In a statement, Mr. Sharma said that as the company explores its portfolio review he will "work closely with Terry and the leadership team to find ways to create even more shareholder value."
Mr. Sharma has been president of S&P's rating division since 2007. He took over "in one of the most difficult times facing S&P in the midst of the financial crisis," Mr. McGraw said. Mr. Sharma has testified before Congress several times about his firm's role in rating mortgage-bond deals that helped to trigger the financial crisis. S&P and the other leading rating firms have been criticized by lawmakers as "key enablers" of the financial meltdown.
Mr. Sharma's exit comes as S&P is in the crosshairs of lawmakers in both political parties for its decision to cut its rating on long-term U.S. debt to double-A-plus from triple-A on Aug. 5. The other two major credit-rating firms, Moody's Corp.'s Moody's Investors Service and Fimalac SA's Fitch Ratings have affirmed their triple-A ratings of U.S. debt.
Treasury Department officials have said the decision to downgrade the U.S. was unjustified, contending it was based on an alleged $2 trillion mistake in estimating total federal deficits over the next decade. S&P has said the disagreement stems from a difference in assumptions.
The downgrade rattled financial markets around the world because of triple-A-rated U.S. debt's historic status as the world's safest investment.
In the days following the downgrade, Mr. Sharma defended the firm's decision to investors and appeared on talk shows to do so.
The Securities and Exchange Commission plans to scrutinize the model S&P used to downgrade U.S. debt, people familiar with the matter said earlier this month. The SEC's examination unit also wants to know which S&P employees knew in advance about the downgrade, these people said.
That investigation comes as the SEC also looks closely at the conduct of S&P for its role in developing mortgage-bond deals that helped to trigger the financial crisis, according to people familiar with the matter. In addition, the SEC is reviewing the role played by Moody's, the people said. The Justice Department has also joined that investigation, a U.S. official familiar with the matter said last week.
Mr. Peterson was chosen to succeed Mr. Sharma at S&P partly because of the Citigroup executive's experience in running businesses that face heavy regulation. S&P and the other credit-rating firms have gone from being lightly regulated about a decade ago to being a focus of last summer's Dodd-Frank financial-overhaul law. The SEC is still hashing out the details of a slew of new rules meant to bolster disclosure in the industry.
Mr. Peterson, 53, is perhaps best known for bowing along with former Citigroup CEO Chuck Prince to Japanese officials after allegations of misconduct forced Citi to shut its private bank there in 2004. He took steps to bolster Citi's other business in the region, including consumer finance operations in Japan by appealing to more creditworthy consumers before returning in 2010 to become chief operating officer of Citibank unit.
Mr. McGraw, in a statement Monday night, said Mr. Peterson is "an outstanding global leader" who "has tremendous breadth across financial and capital markets and is a proven operating and strategic executive who has successfully built businesses in multiple markets, including Japan, Latin America and the United States."
Mr. Peterson, in a statement, said S&P was "an organization with a long history and strong commitment to serving investors," adding that he looked forward to "continuing to expand the company around the world by building on its many strengths."
A person familiar with the matter said Mr Peterson had first been contacted around five months ago. His attraction to S&P was his operational expertise in, among other things, turning around Citi's struggling Japanese business and his emerging markets experience, this person added.
Other candidates were also interviewed.
The process of appointing Mr Peterson was held up by the rating firm's decision to downgrade the U.S as the company didn't want to appear rudderless during such an important time, according to people with knowledge of the situation. Mr Peterson is expected to bring a more hands-on approach to rating decisions and processes as well as a greater emphasis on emerging markets.
S&P, Moody's and Fitch Ratings have a U.S. market share of about 95%, based on spending by issuers that pay the firms to rate their debt, Peter Appert, an analyst at Piper Jaffray & Co. has estimated.
Mr. Sharma joined S&P in 2006 as executive vice-president of investment services and global sales. Mr. Sharma has worked with McGraw-Hill Cos. since January 2002.
The move came after two McGraw-Hill activist shareholders had earlier Monday expressed hope the company would recruit a new public face for its ratings unit as part of their breakup plan for the financial-data and publishing powerhouse.
Hedge fund Jana Partners LLC and the Ontario Teachers' Pension Plan suggested that S&P needs a "well-known independent oversight figure to help manage increasingly complex global regulatory landscape and improve dialogue with investors, regulators and the public."
More From WSJ
—Joann S. Lublin, Suzanne Kapner and Gina Chon contributed to this article.
Write to Jeannette Neumann at firstname.lastname@example.org
August 22nd, 2011
- The fire was sparked by a lightning strike during Tropical Storm Irene
- 20 people, including actress Kate Winslet, were in the house at the time
- No one was injured
(CNN) -- A lightning strike sparked a fire Monday that destroyed the Caribbean island home of Virgin Group Chairman Richard Branson, a statement from the media mogul said.
About 20 people, including Oscar-winning actress Kate Winslet, were in the house at the time of the fire, which broke out around 4 a.m., Branson said. No one was injured.
"Many thanks to Kate Winslet for helping carry my 90-year(-old) mum out of the main house to safety," Branson wrote in the e-mailed statement.
Branson said the house, located on Necker Island, the 74-acre private island the billionaire owns in the British Virgin Islands, was destroyed, along with "thousands of photographs and my notebooks."
"But all my family and friends are well -- which in the end is all that really matters," he said.
The lightning strike that caused the fire occurred in the midst of Tropical Storm Irene, which strengthened into a hurricane early Monday.
Pictures show the house completely engulfed in flames against an ominous sky.
"Currently just huddled up with family and friends in the continuing tropical storm realising what really matters in life," Branson said.
He promised to rebuild, saying "we'll create something even more special out of the ruins."
In addition to Branson's private residences on the island, Necker is also open as a luxury resort that can accommodate up to 28 guests for those who can afford the hefty $54,500-a-night price tag.
The island has been featured on such TV programs as "MTV Cribs," and TV personalities Nick Lachey and Vanessa Minnillo were recently married on the island.
August 22nd, 2011
With the rise of the left-wing media, it would seem that Govco had no choice...~BLS
Earlier this summer FCC Chairman Julius Genachowski agreed to erase the post WWII-era rule, but the action Monday puts the last nail into the coffin for the regulation that sought to ensure discussion over the airwaves of controversial issues did not exclude any particular point of view. A broadcaster that violated the rule risked losing its license.
While the commission voted in 1987 to do away with the rule — a legacy to a time when broadcasting was a much more dominant voice than it is today — the language implementing it was never removed. The move Monday, once published in the federal register, effectively erases the rule.
Monday’s move is part of the commission’s response to a White House executive order directing a “government-wide review of regulations already on the books” designed to eliminate unnecessary regulations.
Also consigned to the regulatory dustbin are the “broadcast flag” digital copy protection rule that was struck down by the courts and the cable programming service tier rate. Altogether, the agency tossed 83 rules and regs.
Genachowski said in a statement that the move was aimed at promoting “a healthy climate for private investment and job creation.” Both the Obama administration and the FCC have come under criticism by business groups over laws and regulations such as health care reform and net neutrality rules.