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Vocapedia > Economy


Cycles, sales, business, markets,

prices, taxes, budgets, jobs






















Nate Beeler

Editorial cartoon

The Washington Examiner

Washington, D.C.


18 August 2011


R: U.S. President Barack Obama


















Martin Kozlowski




18 September 2008

















Paul Conrad


The Los Angeles Times Syndicate



14 October 2008















volatile        UK / USA












the ebbs and flows of our economy        USA




































ebb from N




















on double whammy        UK










take a double whammy








demise        UK










rout        UK / USA







20081006 - October 6, 2008


20080317- March 17, 2008










down        UK / USA



























bring down drug prices        USA









nudge down        USA










end down
































downfall        USA




















downturn        UK / USA




















recession        UK / USA



























slip into recession





suffer recession





crisis        USA        2008






global financial crisis        2008






bailout        USA        2008






tapper off






slowdown        UK / USA












suffer a sharp slowdown

in activity and employment





meltdown        UK / USA































stock market wipeout        USA










wipe off















bust        UK / USA






















bump        UK










to the wall






























record low























doldrums        USA






economic doldrums        USA






remain in doldrums        UK






lose steam







































slow        UK






























slow to a crawl        USA

























decline        USA











contract        UK / USA
















































in the red        USA




























cool        USA




















weak        UK


























stall        UK / USA


















slip        USA

























slide into N






slide        UK / USA
















turmoil        UK
























lacklustre global economy





























fall        UK / USA


















fall        UK / USA


















bruising fall        USA







heavy falls





fall sharply        USA






rise and fall        UK






freefall        UK



















droop        USA









































































drop        UK / USA































































drop        UK / USA







































steep drop









record drop















shrink        UK / USA















turn negative        USA










dip        UK / USA
















dip below N        USA


































sink        UK / USA


















sink into N        UK










sink deeper into recession








slump        USA




































slump by 71%        UK











slump        UK / USA





























slump / slowdown








slow sharply








hit a pothole








warn of profits slump








world slump








slump in sales



















Garry Trudeau

October 22, 2023










sales > tank        USA


























a 29 per cent slump in full-year profits








hiring slump / employment decline








squeeze        UK










crunch        UK


































stumble        UK


















profits > halve        UK








































tumble        UK / USA













































19% tumble in Meta’s share price        UK







take a tumble        UK






tumble / plunge into the red





tumble into insolvency        USA






skittish        USA






































































plunge        UK / USA




























































plunge into N        UK










record plunge        USA










plunge        UK


















































dive        USA










dive        UK / USA

























take a dive        USA










nosedive        UK












plummet        UK / USA


































































worsen        UK










turmoil        UK / USA












turbulence        USA




























































collapse        UK / USA



















collapse        UK / USA














































crash        UK/ USA






















http://news.bbc.co.uk/2/hi/business/2131739.stm - 12 February 2003








drag down        UK

























bear market        UK / USA


A bear market

is defined as a period

in which the major stock indexes

drop by 20% or more

from a recent high point

and remain that low

for at least a few months.


The two worst bear markets in history

— during the Great Depression

and the Great Recession —

produced cumulative losses

of 83% and 51%, respectively.


Analysts like to say

that the stock market is not the economy.


But a bear market reflects

concerns and anxieties about the economy,

and at times a bear market is accompanied

by a recession.


A recession is when the economy experiences

two or more consecutive quarters of decline.





This is one of those terms

for which the internet offers

various competing “folk etymologies”,

which is the linguist’s

polite term for nonsense.


Bear markets are named

because bears attack

by swiping their paws downwards?



The origin in fact lies

in the old proverb warning

that you shouldn’t sell a bear’s skin

before you have caught the bear.


In the 18th century,


who did sell borrowed commodities

before they had paid for them

– in anticipation

of profiting from a fall in price –

were therefore called “bearskin jobbers”,

later shortened to “bears”.


So bears expect

the value of investments

to go down.


By contrast,

those who expected prices to go up

came to be called “bulls”,

perhaps because that beast is famously

headstrong and incautious.


In times such as these,

we might prefer after all to be led

by bears rather than bulls.































loss        UK













































slash        UK / USA











































go bust










file for bankruptcy  -  go into administration / insolvency  (UK)

file for chapter 11  (USA)












go down





go to the wall





going out of business        USA        2008










financial ruin





hit the buffers





move back into the black        UK






wind up        UK






be forced into provisional liquidation        UK






white knight





















fear        UK












panic        UK / USA








mayhem        UK






abyss        UK






the worst is yet to come        2008

















R.J. Matson

Comment cartoon

The New York Observer and Roll Call



25 August 2010















Corpus of news articles


Economy >


Cycles, sales, business, markets,


prices, taxes, budgets, jobs >





Stumbling Toward the Next Crash


December 18, 2013

The New York Times



LONDON — In early October 2008, three weeks after the Lehman Brothers collapse, I met in Paris with leaders of the countries in the euro zone. Oblivious to the global dimension of the financial crisis, they took the view that if there was fallout for Europe, America would be to blame — so it would be for America to fix. I was unable to convince them that half of the bundled subprime-mortgage securities that were about to blow up had landed in Europe and that euro-area banks were, in fact, more highly leveraged than America’s.

Despite the subsequent decision of the Group of 20 in 2009 on the need for rules to supervise what is now a globally integrated financial system, world leaders have spent the last five years in retreat, resorting to unilateral actions that have made a mockery of global coordination. Already, we have forgotten the basic lesson of the crash: Global problems need global solutions. And because we failed to learn from the last crisis, the world’s bankers are carrying us toward the next one.

The economist David Miles, who sits on the monetary policy committee of the Bank of England, may exaggerate when he forecasts financial crises every seven years, but most of the problems that caused the 2008 crisis — excessive borrowing, shadow banking and reckless lending — have not gone away. Too-big-to-fail banks have not shrunk; they’ve grown bigger. Huge bonuses that encourage reckless risk-taking by bankers remain the norm. Meanwhile, shadow banking — investment and lending services by financial institutions that act like banks, but with less supervision — has expanded in value to $71 trillion, from $59 trillion in 2008.

Europe’s leaders aren’t the only ones with these blind spots. Emerging-market economies in Asia and Latin America have seen a 20 percent growth in their shadow-banking sectors. After 2009, Asian banks expanded their balance sheets three times faster than the largest global financial institutions, while adding only half as much capital.

In the patterns of borrowing today, we can already detect parallels with the pre-crisis credit boom. We’re seeing the same over-reliance on short-term capital markets that ultimately brought down Northern Rock, Iceland’s banks and Lehman Brothers.

While the internationalization of the renminbi is opening up new opportunities for global investment in China, it is also increasing the exposure of the global economy to any vulnerability in its banking sector. China’s total domestic credit has more than doubled to $23 trillion, from $9 trillion in 2008 — as big an increase as if it had added the entire United States commercial banking sector. Borrowing has risen as a share of China’s national income to more than 200 percent, from 135 percent in 2008. China’s growth of credit is now faster than Japan’s before 1990 and America’s before 2008, with half that growth in the shadow-banking sector. According to Morgan Stanley, corporate debt in China is now equal to the country’s annual income.

Although sizable foreign reserves make today’s Asia different from the Asia that experienced the 1997 crash in Indonesia, Thailand and South Korea, we are all implicated. If China’s economy were to slow, Asian countries would be doubly hit from the loss of exports and by higher prices. They would face downturns that would feel like depressions.

And China’s banking system may not be Asia’s most vulnerable. Thailand’s financial institutions, for example, appear overdependent on short-term foreign loans; and in India, where 10 percent of bank loans have gone bad or need restructuring, banks will need $19 billion in new capital by 2018.

If the emerging markets of Asia and Latin America are hit by financial turmoil in coming years, will we not turn to one another and ask why we did not act after the last crisis? Instead of retreating into our national silos, we should have seized the opportunity to fix global standards for how much capital banks must hold, how much they can lend against their equity, and how open they are about their liabilities.

The Volcker Rule, now approved by American regulators, illustrates the initial boldness and ultimate weakness of our post-2008 response. This element of the Dodd-Frank financial reform law of 2010 forbids deposit-taking banks in the United States from engaging in short-term, proprietary trading. But these practices are still allowed in Europe. Controls are even weaker in Latin America and Asia.

International rules are needed for international banks. Without them, as the International Monetary Fund has warned, global banks will evade regulation “by moving operations, changing corporate structures, and redesigning products.”

When I was chairman of the G-20 summit meeting here in April 2009, our first principle was that future financial crises that started in one continent would affect all continents. That was why we charged the new Global Financial Stability Board with setting global standards and rules.

Nearly five years on, its chairman, the Bank of England governor Mark Carney, has spoken of “uneven progress” in recapitalizing banks and making them disclose their risks. The G-20 plan for oversight of shadow banking is, as yet, only a plan. While the world’s $600 trillion derivatives market is being regulated with new minimum capital and reporting requirements, global financial regulators must “find a way to collaborate across borders,” Mr. Carney says.

In short, precisely what world leaders sought to avoid — a global financial free-for-all, enabled by ad hoc, unilateral actions — is what has happened. Political expediency, a failure to think and act globally, and a lack of courage to take on vested interests are pushing us inexorably toward the next crash.


Gordon Brown, a Labour member of the British Parliament,
is a former chancellor of the Exchequer and prime minister.

Stumbling Toward the Next Crash,






Data Show County’s Pain

as Economy Plummeted


September 22, 2011

The New York Times



GREENWOOD, S.C. — The Greenwood Mills Matthews Plant once employed three generations of Frances Flaherty’s family. Her grandmother, father and brother made textiles there — denim for jeans and khaki for military uniforms.

But it all but closed in 2007 when the economy soured, pitching dozens of workers into the ranks of the unemployed, and the plant now functions mainly as a bleak backdrop to Ms. Flaherty’s restaurant, the Southside Cafe, where diners gaze out at its red brick walls.

“It’s what held this town together, all the mills,” Ms. Flaherty said, watching another thinly attended lunch hour go by. “They just slowly but surely dwindled out.”

The falloff of the economy of Greenwood County, a district of almost 70,000 people that once pulsed with busy factories and mills, was the steepest in the country by two counts.

According to an analysis of Census Bureau figures made public on Thursday, its poverty rate more than doubled to 24 percent from 2007 to 2010, the largest increase for any county in the nation.

The decline also engulfed the middle class. Median household income plunged by 28 percent over the same period, shaving nearly $12,000 off the annual earnings of families here during the recession, according to the analysis, by Andrew A. Beveridge, a demographer at Queens College.

The numbers tell the story of a painful decade in Greenwood, which began with poverty levels that were close to the nation’s, and ended far above — after layoffs in textile mills, a foundry, restaurants and construction companies pummeled the county’s residents.

The number of workers in manufacturing alone fell by a quarter in the county from 2005 to 2009, according to a census survey of employers.

Those new facts are just sharp reminders to people here about what they have lived through.

“There just aren’t any jobs in Greenwood anymore,” said James Freeman, 58, a former textile mill worker. “My son can’t even get a job flipping burgers.”

Mr. Freeman worked for years in the textile mills, including the Matthews plant. He lost his last mill job in 2007 and was unable to find another. The work at one of the mills that employed him went to Argentina, he said, because the fabric was cheaper to produce there. Those workers were paid less, he was told, and got no benefits.

“That made me feel kind of bad,” said Mr. Freeman, who now collects disability. The mill’s closing “hurt a lot of people here in Greenwood.”

Disappointment like Mr. Freeman’s has welled up in areas of deep economic decline, infusing this election season with a blend of exhaustion and bitterness.

“Until we bring the companies back from overseas and stop protecting the world, we’re not going to be anything,” said Sam Stevenson, a retired construction worker, who could summon only expletives when asked about President Obama’s job plan.

In many ways, Greenwood is a typical American county. More than a quarter of its residents had at least some college education in 2009, roughly the same as the 27 percent nationally. It has a public university, which grants four-year degrees, a museum and a shopping mall.

But education has not seemed to ease the economic pain in an area whose fortunes were tied so closely to the textile industry that is now in such steep decline. Signs with the words “space available” are posted outside vacant factories on the road between here and Columbia, 80 miles to the east.

A red brick Baptist church on the outskirts of town commanded on its marquee, “Have your tools ready, and God will find you work.”

Apache Pawn and Gun, a pawn shop in town, is packed with items sold by people trying to make ends meet. Televisions, chain saws, bicycles and guitars are stacked from floor to ceiling. Chris Harris, the owner, said more middle-class people had come in to buy since the recession began.

“They’re saying, ‘Why should I buy a new chain saw when I could buy a used one?’ ” Mr. Harris said.

Ms. Flaherty said her cafe —its walls adorned with black-and-white photographs of mill workers and residents from happier times —is barely making it. When she opened in 2007, lunch used to bring lines out the door from workers at the plant and other businesses. Now it draws only a few diners. On Wednesday around 1:30 p.m., there were two.

And while housing prices have picked up — now a median of about $120,000 for the current listings compared with $109,000 in 2009 — the economy this year does not seem to be getting any better.

“It’s been bad this year,” said Kathy Green, owner of the Garden Grill, who said business was down significantly since the start of the recession. People order less, she said, and come in for the specials — $6 for a hamburger, fries and a drink.

Ms. Green said, “People just don’t have the money anymore.”


Barclay Walsh contributed reporting from Washington,

and Anne McQuary from Greenwood.

    Data Show County’s Pain as Economy Plummeted, NYT, 22.9.2011,






Stocks Plunge

on Fears of Global Turmoil


August 4, 2011
The New York Times


What began as a weak day in the stock markets ended in the worst rout in more than two years, as investors dumped stocks amid anxiety that both Europe and the United States were failing to fix deepening economic problems.

With a steep decline of around 5 percent in the United States on Thursday, stocks have now fallen nearly 11 percent in two weeks. Markets have been plunging as investors sought safer havens for their money — including Treasury bonds, which some had been avoiding during the debate over extending the nation’s debt ceiling.

Sparking the drop was an unsuccessful effort by the European Central Bank to reassure the markets, which instead ended up spooking investors. The bank intervened with a show of support to buy bonds of some smaller countries, but not Italy and Spain, whose mounting troubles have come into the spotlight. This was taken as a sign that the recent rescue packages by Europe could soon be overwhelmed by the huge debt burdens in those two countries.

Investors were further unnerved by a candid remark by José Manuel Barroso, the European Commission president, who seemed to confirm fears about the sense of political paralysis. Rather than play down the problems, as European officials have done since the debt crisis began last year, he said, “Markets remain to be convinced that we are taking the appropriate steps to resolve the crisis.”

With investors in the United States already focusing anew on fragile economic growth and high unemployment, waves of selling of stocks began in Europe and continued throughout the day in the United States. Analysts said the market still might have further to fall, as investors reassess the dimming economic prospects. In the short run, attention will be focused on critical unemployment numbers for July to be released on Friday morning. And some in the markets are already questioning whether the Federal Reserve has done enough to mend the economy and whether it could soon take further steps to stimulate growth.

On Thursday, more than 14 billion shares changed hands, the heaviest selling in more than a year. In addition to being unnerved by weaker economic data reported in recent days, investors appeared to lose their optimism about the strength of corporate profits that had driven increases in the stock market in the first half of this year.

At the close, the Standard & Poor’s 500-stock index was down 60.27 points, or 4.78 percent, to 1,200.07. The Dow Jones industrial average was off 512.76 points, or 4.31 percent, to 11,383.68, and the Nasdaq was down 136.68, or 5.08 percent, to 2,556.39.

The S.& P. 500 has now fallen 10.7 percent from 1,345 on July 22, underlining the new negative investment sentiment about the economy and about Europe.

“We are now in correction mode,” said Sam Stovall, chief investment strategist at Standard & Poor’s. “We could have another couple of weeks to go before it bottoms.”

The last time the market was in a correction was last summer, when it fell 16 percent before recovering.

Analysts said credit markets were still healthy and the United States was now stronger than just a few years ago so that a repeat of the financial crisis was unlikely.

“There is a huge difference — during the financial crisis the banking sector broke down. Right now it’s a crisis of confidence based on weak economies but the banking sector is not broken,” said Reena Aggarwal, professor of finance at Georgetown University.

The Vix, which measures the implied volatility of options on the S.& P. 500 index, and is called the fear index by traders, spiked on Thursday, though it is still much lower than during the depths of the financial crisis in 2008.

Washington’s reaction to the market’s tumble was muted. The Treasury Department said it did not plan to issue any statements or provide officials to comment.

“Markets go up and down,” said the White House spokesman, Jay Carney. “We obviously are monitoring the situation in Europe closely.”

As the prospects for economic growth dimmed, several commodities, including oil, silver and palladium, fell by more than 5 percent, perhaps producing some good news for consumers.

With oil prices dropping below $87 a barrel, wiping out the rise caused by unrest in the Middle East and North Africa earlier in the year, drivers can expect sharply lower gasoline prices just in time for the Labor Day weekend and back-to-school shopping.

Agricultural crops and most industrial metals fell somewhat less drastically, with copper falling 1.9 percent, aluminum by 1.7 percent, corn by 1.9 percent, wheat by 3.4 percent and soybeans by 1.8 percent.

Taken together, the drops should mean lower input costs for manufacturers and give the Federal Reserve more policy options should the economy continue to slow.

A closely-watched survey of American investor attitudes provided by the American Association of Individual investors on Thursday showed the biggest increase in bearish sentiment for five years in the latest week. As investors fled assets like stocks, they piled into the perceived safety of United States Treasuries where 10-year interest rates fell to 2.41 percent, recording the biggest one day fall since March 2009.

Yields on one-month United States notes actually fell into negative territory before closing at zero.

Besides piling into Treasuries, institutional investors are also seeking out the safety of cold, hard cash, pouring billions into commercial bank accounts backed up by the Federal Deposit Insurance Corporation. Investors had also been buying Swiss francs and Japanese yen. But earlier this week, Switzerland unexpectedly cut interest rates in an effort to weaken the franc. Japan on Thursday also intervened to weaken its currency, raising the specter that more nations could take similar steps to try to protect their economies.

Around the world, markets from Brazil to Turkey were battered.

In Britain, stocks closed down 3.43 percent. In Germany, the DAX index dropped 3.4 percent. In France, the CAC 40 closed down 3.9 percent.

“It really is Europe today,” said Barry Knapp, head of United States equity strategy at Barclays Capital. “The market feels that European leaders are one step behind, and they are.”

Asian markets quickly followed suit in trading lower. In midday trading on Friday, the Nikkei 225 in Japan was down 3.47 percent to 9,312.22 while the S.& P./ASX 200 index in Australia fell 3.98 percent to 4,106.40. The Hang Seng index in Hong Kong opened sharply lower as well, and was down 4.6 percent to 20,865.95 by midday.

With some warning signs that weaker European banks are struggling to fund themselves, the central bank moved to help weaker banks by expanding its lending to institutions in the euro zone. Bank stocks nevertheless fell sharply in Europe.

In the United States, as the stock market fell, it broke through critical support levels, leading to more selling as traders rushed to reduce exposure to plummeting prices. That included computerized program traders, one analyst said.


Reporting was contributed

by Nelson D. Schwartz, Clifford Krauss,

Mark Landler, Motoko Rich and Bettina Wassener.

    Stocks Plunge on Fears of Global Turmoil, NYT, 4.8.2011,






U.S. Markets Plunge,

Then Stage a Rebound


May 6, 2010
The New York Times


A bad day in the stock market turned into one of the most terrifying moments in Wall Street history on Thursday with a brief 1,000-point plunge that recalled the panic of 2008.

It lasted just 16 minutes but left Wall Street experts and ordinary investors alike struggling to come to grips with what had happened — and fearful of where the markets might go from here.

At least part of the sell-off appeared to be linked to trader error, perhaps an incorrect order routed through one of the nation’s exchanges. Many of those trades may be reversed so investors do not lose money on questionable transactions.

But the speed and scale of the plunge — the largest intraday decline on record — seemed to feed fears that the financial troubles gripping Europe were at last reaching across the Atlantic. Amid the rout, new signs of stress emerged in the credit markets. European banks seemed to be growing wary of lending to each other, suggesting the debt crisis was entering a more dangerous phase.

Traders and Washington policy makers struggled to keep up as the Dow Jones industrial average fell 1,000 points shortly after 2:30 p.m. and then mostly rebounded in a matter of minutes. For a moment, the sell-off seemed to overwhelm computer and human systems alike, and some traders began referring grimly to the day as “Black Thursday.”

But in the end, Thursday was not as black as it had seemed. After briefly sinking below 10,000, the Dow ended down 347.80, or 3.2 percent, at 10,520.32. The Standard & Poor’s 500-stock index dropped 37.75 points, or 3.24 percent, to close at 1,128.15, and the Nasdaq was down 82.65 points, or 3.44 percent, at 2,319.64.

But up and down Wall Street, and across the nation, many investors were dumbstruck. Experts groped for explanations as blue-chip stocks like Procter & Gamble, Philip Morris and Accenture plunged. At one point, Accenture fell more than 90 percent to a penny. P.& G. plunged to $39.37 from more than $60 within minutes.

The crisis in Greece, high-speed computer program trading, the debate over regulatory reform in Washington, talk of errant trades — all were pointed to as possible catalysts. But most agreed the plunge would not have been as bad had the markets not already been on edge over the debt crisis in Europe.

“There is a recognition that the Greek crisis has morphed into not only a European crisis but is going global,” said Mohamed A. El-Erian, chief executive of Pimco, the money manager.

On the trading floor of the New York Stock Exchange, traders shouted or watched open-mouthed as the screens lighted up with plummeting prices and as phones rang off the hook. “It was almost like ‘The Twilight Zone.’ ” said Theodore R. Aronson of Aronson, Johnson & Ortiz, a money management firm in Philadelphia.

Wall Street managers wandered their trading floors, trying to calm their people and figure out what was going on. They began to notice wild movements in stocks like P.& G. and Philip Morris. Many traders said computer program trades accelerated the slide as market indexes fell through crucial levels.

In Washington, Treasury officials began combing market tapes for answers. By the evening they still had not gotten to the bottom of it, but they discovered some aberrations — market blips — in trading coming out of Chicago.

The Treasury secretary, Timothy F. Geithner, was returning to the Treasury about 2 p.m. from the Capitol when he saw on his BlackBerry that the market was down 3 percent. He called the Treasury’s market room, which constantly monitors financial exchanges; officials there theorized that the cause was Greece’s and Europe’s financial woes.

Minutes later in the Treasury hallway, Mr. Geithner looked again at his BlackBerry and saw that the market was down nearly 9 percent. He told colleagues it had to be a mistake.

Mr. Geithner immediately called the market room and then the Federal Reserve. He held a conference call with Fed officials and Mary L. Schapiro, the chairwoman of the Securities and Exchange Commission. About 3:15, Mr. Geithner walked to the Oval Office to brief President Obama.

Next Mr. Geithner spoke with European central bankers. After the markets closed, at 4:15 and again at 5:45, he joined conference calls with the heads of the Fed, the New York Fed, the S.E.C. and the Commodity Futures Trading Commission; the calls were expected to continue into the evening.

The Group of 7 industrial nations’ ministers and governors, including Mr. Geithner, plan a conference call at 7:30 a.m. Friday Eastern time.

As of about 6 p.m., all the officials knew was that there had been what one called “a huge, anomalous, unexplained surge in selling, it looks like in Chicago, at about 2:45.” The source remained unknown, but it had apparently set off algorithmic trading strategies, which in turn rippled across everything, pushing trading out of whack and feeding on itself — until it started to reverse.

Federal officials fielded rumors that the culprit was a single stock, a single institution or execution system, a $16 billion trade that should have been $16 million. But they did not know the truth.

What happens to the day’s market losers will depend on the nature of the cause and whether it can be identified. That is a question for the S.E.C. The Nasdaq market said in the evening that it would cancel all trades in hundreds of stocks whose prices had swung wildly between 2:40 p.m. and 3 p.m.

As Wall Street reeled, anchors on CNBC, Bloomberg and the Fox Business Network turned their attention to the Dow.

When the Dow was down more than 900 points and the CNBC anchor Erin Burnett observed that the P.& G. stock had dropped 25 percent, Jim Cramer, the former hedge fund trader and the host of “Mad Money,” seemed to calm the conversation a bit by basically saying, “Buy, buy, buy.”

“If that stock is there, you just go and buy it,” he said of P.& G. “That is not a real price. Just go buy Procter & Gamble.”

The day’s uncertainty pushed the euro to its lowest level against the dollar in 14 months. It slipped to $1.2529 at one point before closing at $1.2602. The dollar’s rise, and the mounting fear of a slowdown in global growth, sent commodities prices lower. Crude oil fell $2.86 to settle at $77.16 a barrel.

By the close, when calm was restored, the focus was on working out what had happened.

The S.E.C. and the Commodity Futures Trading Commission said they were reviewing “unusual trading activity.” But already markets were turning attention back to Europe — whether German lawmakers would approve the Greek bailout on Friday, whether warning signals would flash brighter, whether the euro zone would stay together, or whether this was a precursor of more gyrations to come.

Eric Dash, Christine Hauser, Nelson D. Schwartz,

Jackie Calmes and Binyamin Appelbaum

contributed reporting.

    U.S. Markets Plunge, Then Stage a Rebound, NYT, 6.5.2010,






Cost of crash:


• Bank of England calls for reform
• Markets jittery after Asian losses
• Brown defends borrowing


Tuesday October 28 2008
The Guardian
Larry Elliott, Phillip Inman and Nicholas Watt
This article appeared in the Guardian
on Tuesday October 28 2008
on p1 of the Top stories section.
It was last updated at 08.17 on October 28 2008.


Autumn's market mayhem has left the world's financial institutions nursing losses of $2.8tn, the Bank of England said today, as it called for fundamental reform of the global banking system to prevent a repeat of turmoil "arguably" unprecedented since the outbreak of the first world war.

In its half-yearly health check of the City, the Bank said tougher regulation and constraints on lending would be needed as policymakers sought to learn lessons from the mistakes that have led to a systemic crisis unfolding over the past 15 months.

The Bank's Financial Stability Report, which will be sent to every bank director in Britain, more than doubled the previous estimate of the potential losses faced by all financial institutions since the spring, but said that given time the actual losses could be pared by between a third and a half.

The £50bn pledged by the government had helped underpin the system, the Bank said, and would provide a breathing space for UK banks so that they did not have to sell assets at cut-price values immediately. The report also expressed cautious optimism about the effectiveness of the recent global bail-out plan.

The Bank's estimate exceeds that made by the International Monetary Fund recently. The IMF concentrated on US institutions and did not include losses from the turmoil of recent weeks. Estimated paper losses from UK banks on mortgage-backed securities and corporate bonds are currently £122.6bn, the Bank report said.

Gordon Brown insisted yesterday that it was right for the government to increase borrowing in order to fund investment to help the economy through tough times. But he moved to reassure markets that he would not preside over a reckless increase in borrowing during the recession and said he would reduce it as a proportion of GDP once the economy picks up.

Paving the way for an expected abandonment of the tight fiscal rules he established as chancellor, Brown said: "The responsible course of government is to invest at this time to speed up the economic activity. As economic activity rises, as tax revenues recover, then you would want borrowing to be a lower share of your national income. But the responsible course at the moment is to use the investments that are necessary, and to continue them, and to help people through very difficult times.

"I think that's a very fundamental part of what we are doing."

In another turbulent day yesterday on global markets, there were hefty falls in Asian stockmarkets and a fresh fall in the pound. Japan's Nikkei index closed down more than 6% at a 26-year-low of 7162.9. London's FTSE 100 recovered from an early fall of more than 200 points to close 30 points lower at 3852.6, while the Dow Jones closed down 2.42% at 8,175.77.

Brown and Peter Mandelson, the business secretary, served notice that Britain should brace itself for a downturn when they both warned about rising unemployment. Brown said: "I can't promise people that we will keep them in their last job if it becomes economically redundant. But we can promise people that we will help them into their next job."

Mandelson was more blunt as he warned of the impact of the recession. "We are facing an unparalleled financial crisis," he said during a visit to Moscow. "I don't think yet people have realised what the impact is going to be on our real economy."

The Tories intensified their attacks on the government by depicting Brown as not a man with a plan but a man with an overdraft.

Responding to Brown's remarks, George Osborne, shadow chancellor, said: "What they are talking about is borrowing out of necessity, not out of virtue. Gordon Brown is a man with an overdraft, not a man with a plan. He is being forced into this borrowing. He presents it as a strategy but it is actually a consequence of his great failure that borrowing is already out of control before we even get into the worst of the economic circumstances that we are in."

Brown was speaking as the Treasury finalised plans to rewrite the fiscal rules which have governed his approach to the economy over the past decade. Alistair Darling will use his pre-budget report next month to say that it is time for a more flexible approach in the new economic cycle, which started in 2006-07.

The previous FSR in April envisaged a gradual recovery in global markets and the Bank was careful today not to sound the all-clear despite the coordinated action in Britain, the US and the eurozone this month to recapitalise banks and provide extra liquidity to markets. "In recent weeks, the global banking system has arguably undergone its biggest episode of instability since the start of the first world war," it said.

Sir John Gieve, the Bank's deputy governor for financial stability, added: "With a global economic downturn under way, the financial system remains under strain. But it is better placed as a result of the exceptional package of capital, guaranteed funding and liquidity support. That is helping to underpin the banking system both directly and by demonstrating the authorities' determination to do whatever is needed to restore confidence.

"Looking further ahead, we need a fundamental rethink of how to manage systemic risk internationally. We need to establish stronger restraints on the build-up of risks in the financial system over the cycle with the dangers they bring to the wider economy.

"That means not just increasing capital and liquidity requirements for individual institutions but relating them to the cyclical growth of risk in the system more broadly. Counter-cyclical policy of that sort should complement regulation of companies and broader macroeconomic policy."

The Bank believes that the capital injection from the taxpayer will also prevent banks from slashing their lending too aggressively over the coming months, relieving the recessionary pressure on the economy.

Figures released yesterday, however, from financial data provider Moneyfacts showed banks were failing to pass on interest rate cuts to mortgage borrowers despite making severe cuts in savings rates. It said most institutions had already passed on the last half-point base rate cut to savers while holding back on cuts in home loan interest rates.

"Some providers are using the base rate cut as a way of increasing their margin for risk, by not passing on the full cut to mortgage customers but passing the cut on in full to savings customers," it said.

A separate study last week marked a new low in the number of mortgage products available.

Concerns at widespread job losses across the finance sector prompted unions to demand a "social contract" to protect jobs. Derek Simpson, Unite's joint general secretary, said: "Workers in the financial services are facing insecurity as the world is gripped by economic turmoil. The Unite 'social contract' sets out the principles which employees expect the government and finance companies to now sign up to.

"Unite is calling for the protection of jobs, pensions, the end to short-term remuneration policies and an overhaul of the regulatory structures in the financial services sector. There must be a recognition of the importance of employment in the financial services sector, as many communities now depend on the sector since being decimated by the collapse of the manufacturing industry.

"Workers in the financial services industry are not the culprits of the credit crunch and we are not prepared to allow them to become the victims. The taxpayer must now get firm assurances that the financial lifeline extended to these large organisations will be used to protect jobs and the public. It is not acceptable for the government to socialise the risk without allowing the wider society to capitalise on the rewards in the finance industry."


How much is that?

The Bank of England may have put the paper cost of the global crisis at a staggering $2.8 trillion, but how does one come to grips with such a sum? Think of it like this: it could pay for 46 bail-outs of the kind the Treasury handed to the banks RBS, HBOS group and Lloyds TSB; or pay off the last quarter's public debt 45 times. It is more than three times the sum of UK annual public spending, and also equivalent to the wealth of 100 Oleg Deripaskas - before the credit crunch anyway. It's equal to 138m bottles of 1947 Petrus Pomerol, the bankers' favourite vintage; or, if it's your turn in the coffee round, 773bn lattes - nearly 13,000 each for every UK citizen.

    Cost of crash: $2,800,000,000,000, G, 28.10.2008,






Oil falls below $63 to 17-month low

as investors eye falling demand


27 October 2008
USA Today


SINGAPORE (AP) — Growing evidence of a severe global economic slowdown drove oil prices to 17-month lows below $63 a barrel Monday, as investors brushed off a sizable OPEC output cut.

Traders were taking their cues from world markets, which slumped again Monday with the Nikkei index in Japan closing at its lowest in 26 years, down 6.4%. Hong Kong, and European markets followed suit, closing or trading substantially lower. The Dow Jones industrial average fell 3.6% Friday.

Light, sweet crude for December delivery declined $1.57 to $62.58 a barrel in electronic trading on the New York Mercantile Exchange by noon in Europe, the lowest since May 2007.

On Friday — even after the Organization of Petroleum Exporting Countries announced a 1.5 million barrel-a-day cut — oil fell $3.69 to settle at $64.15. Prices have plunged 57% from a record $147.27 on July 11.

"The mood is fairly negative reflecting worry about the international economic outlook," said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney. "If there is further weak economic data in the U.S. or Europe, prices could come under more downward pressure."

Iran's OPEC governor Mohammad Ali Khatibi said Sunday a reduction in production "will be considered" at the group's next meeting in Algiers in December — a meeting that might even be held early if necessary.

"I thought the OPEC cut was a fairly decisive act, but concerns of recession in the major economies remain dominant," Moore said. "OPEC's cut does take a step toward tightening the market."

Vienna's JBC Energy said prices were out of OPEC's control — for now.

"Oil is currently being driven by the present financial crisis and not by OPEC cuts," said its research report. "As oil prices are being pressured by the credit squeeze and a lack of liquidity, they may stay largely detached from supply factors for several weeks to come. As a result, OPEC is currently struggling with factors beyond its control."

Investors have been paying close attention to signs that a slowing economy and higher gasoline prices earlier this year have hurt crude demand in the U.S., the world's largest oil consumer.

The U.S. Department of Transportation said Friday that Americans drove 5.6% less, or 15 billion fewer miles (24 billion fewer kilometers), in August compared with same month a year ago — the biggest single monthly decline since the data was first collected regularly in 1942.

"If we're looking a severe economic downturn, it's hard to say what the bottom of any commodity price will be," Moore said.

In other Nymex trading, gasoline futures fell more than 3 cents to $1.44 a gallon, while heating oil slipped by more than 4 cents to $1.91 a gallon. Natural gas for November delivery fell nearly 21 cents to $6.03 per 1,000 cubic feet.

In London, November Brent crude was down $1.75 to $60.30 a barrel on the ICE Futures exchange.

Oil falls below $63 to 17-month low
as investors eye falling demand,
UT, 27.10.2008,
http://www.usatoday.com/money/industries/energy/2008-10-27-oil-monday_N.htm - broken link






High-Flying Hedge Fund

Falls Back to Earth


October 14, 2008
The New York Times


Only 10 months ago, Remy Trafelet was so flush that he treated about 100 employees at his hedge fund to a getaway in Venice. He and his crew spent a long, luxurious weekend at the five-star Hotel Bauer, which has Murano glass chandeliers, private gondoliers and a splendid view of a 17th-century basilica.

But now, a bit like Venice, Mr. Trafelet’s hedge fund seems to be sinking. His flagship fund has fallen about 26 percent this year, and Mr. Trafelet is struggling to hold on to anxious employees, as well as some investors.

Perhaps the most remarkable thing about Mr. Trafelet is that he is not so remarkable at all. Thousands of hedge fund managers like him — mostly young, mostly male and virtually all unknown outside financial circles — confront a sober reality: for now, the days of easy money are over.

The economics of the hedge fund industry, so lucrative on the way up, are trying even the most seasoned managers on the way down. Hotshots who amassed millions or even billions of dollars from deep-pocketed investors are struggling to persuade those backers to stick with them. For the $2 trillion hedge fund industry, a long-feared shakeout is at hand. Some analysts say one out of every 10 funds could fold.

Mr. Trafelet, who is 38 and first made his name managing money at the mutual fund giant Fidelity, insists his Trafelet & Company will be one of the survivors. He has been through rough patches before and says he is not about to give up now.

“There is an easy way out, but I’m not the one who is going to take it,” Mr. Trafelet said in an investor call on Thursday. “I feel an absolute personal and moral obligation to work as hard as possible especially through a difficult period.”

Still, managers like Mr. Trafelet confront formidable challenges. His fund has dwindled to about $3 billion, from $6 billion at its peak in 2006. It has been three years since he produced the kind of double-digit returns that many funds generated in the industry’s heyday, before thousands of new managers crowded in and made spotting profitable trades far more difficult.

It might be easy to dismiss Mr. Trafelet’s story as a simple tale of a highflier falling back to earth. But the fortunes of the hedge fund industry matter to nearly every investor big or small. In recent years, public and corporate pension funds, endowments and foundations poured money into these private investment vehicles in the hope of reaping market-beating returns.

So far this year, the average hedge fund is down 17 percent, about half as much as the Standard & Poor’s 500-stock index.

As losses mount, hedge fund managers are consulting lawyers to determine whether their fiduciary duty dictates that they should shut their doors, liquidate their holdings and use the proceeds to pay back investors — before the losses get worse — or stay in business and try to trade their way out of the hole.

It was easy to look like a star during the bull market. Mr. Trafelet returned 42 percent in 2005, 17 percent in 2004 and 39 percent in 2003. He made money after the technology bubble burst and others struggled.

Mr. Trafelet says he believes he can survive. He said in an interview on Friday morning that he had shifted half of his Delta Institutional fund’s money into cash and that he thought his bets would turn around.

“We wouldn’t be working this hard and investing in the firm if we didn’t see the massive opportunity,” Mr. Trafelet said.

But Trafelet, founded in New York in 2000, is in a weaker position than other hedge funds because the fund returned only 6 percent last year and 2 percent in 2006, according to an investor. Investors who are evaluating whether to leave Mr. Trafelet’s fund versus other funds may choose to remain with funds that made them more money recently.

Much of Trafelet’s money is Mr. Trafelet’s own, so to an extent, he can choose to keep going regardless of investor flight. In the hedge fund world, traders have remade their fortunes dozens of times over, and Mr. Trafelet may impress again in the coming years.

It has been quite a ride for Mr. Trafelet, who developed his taste for stock-picking while attending the elite boarding school Phillips Exeter Academy. After graduating from Dartmouth College, he took a job at Fidelity. By age 25, he was managing a $500 million mutual fund.

Today, Mr. Trafelet enjoys the trappings of success and is still rich by most standards. He has a home on Park Avenue and takes vacations in places like Fishers Island, the private island in Long Island Sound whose beaches have long attracted old money. In a single good year like 2005, his fund generated hundreds of millions of dollars, which would have been divided between Mr. Trafelet and a few partners after paying expenses.

Unlike some hedge fund traders who use complicated computer models and formulas to spot investments, Mr. Trafelet picks stocks the old-fashioned way: by combing through corporate fundamentals like profits and sales. He makes long-term bets on companies large and small, based on research and meetings with executives at those companies. It has become an urban legend among the stock-picking community that Mr. Trafelet paid college students to count the cars in shopping strips as part of his research.

He is still spending most of his time studying companies, despite the market turbulence, he said, and he says he thinks there is money to be made when the storm passes.

“I don’t know if the market’s going straight up from here or straight down from here,” he said in the investor call. “But I can tell you that there’s massive mispricings all over the place.”

While Mr. Trafelet bets both for and against stocks, he was more long going into September. He lost big on his largest position, the Ultra Petroleum Corporation of Houston, which plunged from $84 three months ago to $40 on Monday, before the broad market rally lifted the stock.

In the middle of September, when regulators temporarily banned short-selling, Mr. Trafelet, like many hedge fund traders, was squeezed. He had to exit some short positions. By the time the month was over, he had lost a stomach-churning 18.5 percent, according to an investor.

Others in the industry started asking questions when Mr. Trafelet laid off a sizable portion of his back-office staff in the middle of the month. He says those cuts were because of a technology upgrade. Last week two more senior employees left. Mr. Trafelet said the departures were not because of the fund’s performance.

Mr. Trafelet’s fund is up 4.5 percent in October, according to an investor, while hedge funds on average are down. But Mr. Trafelet knows the clock is ticking. He has to retain his staff to have any hope of pulling back into the black. At the end of August, he personally guaranteed bonuses for his top traders for this year and told them that, if needed, he would pump more of his own money into his fund in 2009 to safeguard their pay.

    High-Flying Hedge Fund Falls Back to Earth, NYT, 14.10.2008,






Commodity Prices Tumble


October 14, 2008
The New York Times


HOUSTON — The global financial panic and the economic slowdown have put at least a temporary end to the commodity bull market of the last seven years, sending prices tumbling for many of the raw ingredients of the world economy.

Since the spring and early summer, when prices for many commodities peaked amid fears of permanent shortage, wheat and corn — two cereals at the base of the human food chain — have dropped more than 40 percent. Oil has dropped 44 percent. Metals like aluminum, copper and nickel have declined by a third or more.

The swift turnaround is the brightest economic news on the horizon for consumers, putting money into their pockets at a time they need it badly. Gasoline prices in the United States are falling precipitously — by about 24 cents over the last five days, to a national average of $3.21 a gallon on Monday — and analysts said they could go below $3 a gallon nationally this fall, down from a high of $4.11 a gallon in July.

Prices for most commodities remain elevated by past standards, and they rose a bit on Monday amid the broad market rally. But the trend seems to be downward as traders weigh the prospect that the global economic crisis will lead to sharp drops in demand. The big question is whether prices will drop all the way to long-term norms or whether Asia’s continuing economic boom has set a floor.

The rapid commodity decline has eased fears of inflation, a reason central banks were able to lower interest rates around the world last week in an effort to salvage economic growth. It also represents a fundamental shift of view that is driving markets these days.

A scant few months ago, Americans were seen as participants in a bidding war with the emerging Chinese, Indian, Russian and Brazilian middle classes for a basket full of products. But that was before an extreme slowdown in demand for things as diverse as gasoline and aluminum and the retreat of investment money from commodity futures into safer havens like government bonds.

The commodity bust began before last week’s broad market declines, though the panic has exacerbated the pressure on commodities. Oil dropped by 10 percent on Friday alone, but then recovered some of that loss Monday to settle at $81.19 a barrel, far below its high in July of $145.29.

“Commodities followed the euphoria cycle that we had along with housing,” said Robert J. Shiller, an economist at Yale who specializes in market bubbles. “We had the idea that the world is growing very fast, people are getting very rich and, by the way, we are running out of everything. That theory doesn’t seem so good when the economy is collapsing.”

Some analysts, while welcoming the recent declines, say they believe that prices are likely to remain above long-term norms. Food, in particular, could be a continuing problem: today’s prices are still too high to allow many people in developing countries to afford adequate diets. Nor have the recent declines been passed along in American grocery stores, at least as of yet. The United Nations has projected that global food prices will remain elevated for years.

The price increases of recent years served their economic function, calling forth additional supplies of many commodities — farmers planted every acre they could, mining companies opened new mines and oil companies went to the far corners of the earth to drill wells. In many cases, the prices also caused demand to decline even as supply started rising.

Americans, the world’s largest fuel consumers, have been cutting back on gasoline all year, and the decline is approaching double digits. Motorists pumped 9.5 percent less gasoline for the week ended Oct. 3 compared with the same week a year earlier, according to MasterCard Advisors, which tracks spending. In a report on Friday, the International Energy Agency cut its forecast for global oil consumption yet again, projecting that 2008 would end with the slowest demand growth in 15 years.

Big increases in world wheat production because of increased acreage in the United States, Canada, Russia and much of Europe have brought wheat prices to less than $6 a bushel today from nearly $13 in March.

Soybean prices have dropped to $9 a bushel from $16 since July, in part because of a record crop in China and a slowdown in Chinese imports. Corn prices are also easing amid expanded supply.

A theory among economists is that commodity prices are still at the beginning of a steep fall as the credit squeeze takes the world economy into a deep recession.

“When you have a seven-year bull run, you are going to have more than a four-month correction, and we are just beginning our fourth month,” said Richard Feltes, senior vice president and director of commodity research at MF Global Research. “We have got more deflation coming in the housing sector, in capital assets, and it’s going to continue in commodities as well.”

But many economists say a lasting price collapse is unlikely because the emerging middle class and growing populations in developing economies will continue to have strong appetites for fuels and metals.

Some say that the other commodity bull markets in modern history — approximately spanning 1906 to 1923, 1933 to 1955 and 1968 to 1982 — lasted more than twice as long as the current run. They included some sharp corrections before they ran their course, suggesting that the current drop, however precipitous, could be temporary.

Though the picture is slightly different for every commodity, prices generally hit a low point for the decade soon after the terrorist attacks of Sept. 11, 2001, then rose as the global economy strengthened in the following years. From late 2001 until mid-2008, the price of oil rose 800 percent, copper rose 700 percent and wheat rose 400 percent.

The decline of recent weeks has taken virtually every major commodity more than halfway back to its late 2001 price, adjusted for inflation. The recent drop has been so rapid that if the pace continued, it would take only a few more weeks to erase the gains of the bull market entirely.

That suggests to some analysts that prices could hit a floor fairly soon. “The underlying fundamentals of strong demand for energy, food and industrial commodities will come back,” said Michael Lewis, global head of commodities research for Deutsche Bank.

Many analysts think oil could fall to $70 a barrel in the next few months, if not sooner. But it is hard for them to believe it will go much lower: oil is not becoming easier to find, as fields in Mexico peter out and suppliers like Iran, Nigeria and Venezuela remain unreliable.

The costs of finding oil in deep waters or mining oil sands in Canada remain high, in the $60 to $70 a barrel range — and since those are now vital sources of supply, they could help put a floor under the oil price. Additionally, the Organization of the Petroleum Exporting Countries could cut production to try to shore up prices, probably at an emergency meeting it will hold Nov. 18. Analysts note that the credit crisis and economic slowdown will inevitably stall new industrial projects, reducing demand for metals. But the falling prices will also discourage new mining and drilling. When economic growth resumes, that could produce metal shortages that would drive prices back up.

The biggest single factor that will decide whether a prolonged bull market in commodities is over, or just in a lull, is the Chinese economy. The industrial development of that country in recent years was responsible for much of the world’s increased consumption of copper, aluminum and zinc, and almost a third of the increase in oil consumption.

Chinese growth has slowed but is still running above 12 percent, and that country is expected to undertake some huge projects in coming months as it repairs damage from earthquakes and storms.

Kevin Norrish, a senior commodities researcher at Barclays Capital, said that in a recent visit to China he found that domestic demand for copper was still strong but that exports were weakening. Chinese copper wire manufacturers, he said, “are very depressed indeed because their export orders have fallen a long way.”

He said that as high as prices for commodities rose in recent years, the bull run in the late 1970s and early 1980s was even more buoyant. Of all the major commodities, only oil at its peak in July traded at a higher price than in the last bull market, adjusted for inflation.

That previous bull run, stimulated by years of high economic growth and inflation, was followed by nearly two decades of weak prices that accompanied the transition in the United States from an industrial to a service economy. Then China and India appeared on the world stage as major economies at the turn of the new century, followed by the oil-driven economy in Russia and greater consumption in the Middle East the last four or five years. Mr. Norrish is one of many commodities analysts who think that the story of China, India and other developing countries’ spurring commodity demand is not over.

“What we are seeing is a pause in what we see as a very, very long bull run,” Mr. Norrish said.

Commodity Prices Tumble, NYT, 14.10.2008,






The Harder They Fall,

the More I Smile


October 12, 2008
The New York Times


THINGS are bad. Very, very bad. The markets are still seesawing crazily, and financial institutions are folding and being taken over so quickly they’ll have to replace their signs with Jumbotrons to keep up with the name changes. Our own president noted last month that “If money isn’t loosened up, this sucker could go down,” meaning — I think — the economy. But nobody seems to know if the huge bailout plan will work.

How does all of this compounded badness make me feel?

Not so bad, surprisingly.

You see, I was never able to make much money in the markets. I agree with Daniel Waterhouse, a character from the 17th century in “Quicksilver,” Neal Stephenson’s brilliant novel, who says that even though he is a knowledgeable “natural philosopher,” or scientist, he has given up on understanding money. “If money is a science,” he states, “then it is a dark science, darker than Alchemy.”

I couldn’t agree more. My own 401(k) plan has already slipped so far that I might have invested more productively over the last few years by burning the cash for heat. Meanwhile, to hear the financial press and the cable channels describe it, everybody but me — especially in the financial industry — was getting rich.

Now we’re even.

There is, of course, an element of schadenfreude at play, but it’s not simply that I’m happy because others are sad. That’s sick; I would never rejoice at the suffering of my poor and middle-class countrymen who have fallen on hard times, or of the retirees looking at dwindling investments at the moment they need them most. True joy, my friends, is the feeling that comes from knowing that the right people are sad.

If you became obscenely rich riding this bubble, I’m taking pleasure in your fall. Of course, you are still undoubtedly richer than I will ever be. But it’s also clear that being rich means much more to you than it has ever meant to me, so I know you’re in pain. Which is good.

I’m not the only one who feels this way. I recently received a note from Dr. Michael Stone, a psychiatrist in Manhattan who is a professor of clinical psychiatry at Columbia University. “In America it’s every boy’s dream to one day become a millionaire,” he wrote, adding that the subprime mortgage craze and debacle have “made that dream come true for more people than we could ever have imagined before.” He continued: “Only yesterday, it seems, Maurice R. Greenberg, ex-C.E.O. of A.I.G., saw the value of his holdings in his former company change — in one day — from $15.8 billion to $911 million. Where else but in America can even a billionaire become a millionaire?”

The upside of this financial crisis, then, is that everybody and his uncle are beginning to investigate what went wrong. Some of them even have subpoena power. Delicious.

ANOTHER group that I don’t mind seeing break out in a sweat are the stock market analysts who claim that the news industry is dying because the corporate leaders were too stupid to meet the challenge of the Internet. Admittedly, I have a personal bias here. But guess what, guys? Change comes to every industry; it’s how you react over time that makes the difference.

The story of newspapers is undoubtedly grim. Now that many of the analysts’ own shops are being put in a blender, though, would it be unkind to point out that those at the helm of the newspapers didn’t play in the subprime securities market and thus drive their companies off a cliff? Hope you like dealing with change, baby!

Then there are the people whose judgment is so horrifyingly bad that those of us who have honed our sense of schadenfreude must stand back in awe, as if we have been presented with a kind of once-in-a-lifetime performance art. That artist, that visionary, is Gabriel Nathan Schwartz, a lawyer from Denver who had a bit of trouble in August at the Republican National Convention. Mr. Schwartz — no relation — seems to have met a nice lady at a bar during the convention and taken her back to his hotel room.

Here’s what happened next, according to The St. Paul Pioneer Press, in a report that reads like blank verse:

“Once there, the woman fixed the drinks and told him to get undressed.

“And that, the delegate to the Republican National Convention told police, was the last thing he remembered.”

According to the initial police report, when Mr. Schwartz, who is 29, woke up, he was $120,000 poorer. He had been relieved of a great deal of cash plus a $30,000 watch, a $20,000 ring, a $5,000 necklace and a belt worth $1,000. Prada.

In a statement he released once the story of his misadventure started making the rounds of the Internet, Mr. Schwartz said, “I used poor judgment.” A spokeswoman for Mr. Schwartz said that his losses actually amounted to $63,050, and that he has worked with the police to correct the misunderstanding.

In his statement, he said he was “joking around” when he proclaimed during an interview earlier in the convention that he wanted “less taxes and more war,” and that the United States should “bomb the hell” out of Iran.

I might not have the kind of money that gives me expertise in this area, and I don’t own any Prada. But I feel I know a thing or two about wealth. And let me tell you that anybody who wears a $30,000 watch can afford to lose $30,000. Prada goeth before a fall.

Still, let’s not be small about this. It’s easy to joke about a guy who gets himself into a mess, but Mr. Schwartz has ascended to the level of a metaphor. Look at it this way: perhaps he was actually visited by Fortuna, the goddess whose bailiwick includes the realm of investing.

The Romans saw Fortuna as the goddess of luck, but she was also the goddess of fate. Maybe she was giving Mr. Schwartz a preview of the economy to come. Maybe what she put in his drink was a little dose of irrational exuberance — the thought that meeting a woman in a bar and taking her back to a hotel room is a perfectly reasonable thing to do. What could possibly go wrong?

AS a nation, haven’t we been on a somewhat similar misadventure? The nation’s financial institutions smiled at the nice lady in the bar and invited her up to their collective hotel room, hoping for the best. And they got rolled. And, by extension, so did we.

The difference between Mr. Schwartz and the financial institutions is that he didn’t expect the government to bail him out.

The rest of us, clearly, just need to get too big to fail.

    The Harder They Fall, the More I Smile, NYT, 12.10.2008,






FTSE 100 in biggest fall

since Black Monday


Published: October 6 2008 08:35
Last updated: October 6 2008 19:54
The Financial Times
By Neil Hume and Bryce Elder

The London market was routed on Monday with the FTSE 100 suffering its biggest one day percentage fall since Black Monday in 1987, and biggest points fall ever.

The blue-chip index dropped 391.1 points, or 7.9 per cent, to finish at a four year low of 4,589.2 as investors threw in the towel amid fears that a deep global economic slow down was taking hold in spite of measures to bail out the banking system.

This was reflected by the performance of the mining sector, which led the FTSE 100 lower. Kazakhmys slumped 26.6 per cent to 417¾p, while ENRC, which listed at 540p in December, lost 23.4 per cent to 425p, Fresnillo shed 19.9 per cent to 225p and Xstrata ended 19.2 per cent lower at £13.57.

UBS said it now expected global GDP growth of just 2.2 per cent in 2009, down from 2.8 per cent previously. “This suggests a global recession,” the bank said. “As a result we have cut UK mining sector earnings forecasts for 2009/10 by 38 per cent and 41 per cent,” it continued.

On top of that, traders noted that four Chinese steel companies were considering reducing output by 20 per cent, or 20m tonnes, and benchmark ferrochrome prices for the fourth quarter had been set 10 per cent below the previous quarter.

However, Ferrexpo, the Ukrainian producer of iron ore pellets, managed to outperform, falling just 2.1 per cent to 115p after Czech coal producer New World Resources, down 23.1 per cent to 500p, picked up a 20 per cent stake at just 86p a share from Ferrexpo founder Kostyantin Zhevago.

The Ukrainian billionaire, who retains a 51 per cent holding in Ferrexpo, was forced to sell to meet a margin call on a loan, for which the shares were held as collateral.

Banking stocks also slumped. With money markets still gummed up, HBOS dropped 19.8 per cent to 160.8p while Lloyds TSB fell 10.8 per cent to 259p. Based on last night’s closing price, HBOS is trading at a 25 per cent discount to the implied value of Lloyds’ all stock offer. On Friday, the discount was 17 per cent.

Sandy Chen, banks analyst at Panmure Gordon, advised clients to sell Barclays, off 14.7 per cent to 314p, and Royal Bank of Scotland, down 20.5 per cent at 148.1p, citing their potential exposure to defaults on credit default swaps.

“We broadly estimate there could be $50bn of payouts related to Fannie Mae and Freddie Mac CDS, and $400bn of payouts related to Lehman CDS. We think it highly likely that many counterparties, particularly hedge funds, will not be able to raise the cash to meet their ends of these bargains,” Mr Chen warned.

Land Securities fared rather better, closing just 5.1 per cent lower at £12.25 – after John Whittaker’s Peel Holdings announced a raised holding of 5.5 per cent.

Taylor Wimpey was among the biggest fallers in the FTSE 250, which closed 520.8 points, or 6.5 per cent, lower at 7,474.8. Its shares fell 20.1 per cent to 27¾p as investors reacted to Friday’s late news that Fitch had downgraded its rating on the housebuilder’s senior unsecured debt rating to B from BB-. The move followed Friday’s announcement that Taylor Wimpey’s eurobond creditors would be part of its covenant renegotiation process, in addition to bank and US private placement creditors “This process is progressively moving towards a work-out scenario,” Fitch warned.

Rentokil Initial dipped 3.7 per cent to 65¼p on concerns the support services group might need to raise capital from shareholders to pay back a £250m bond which matures next month.

“If it [Rentokil] is unable to refinance at rates it deems acceptable or it is unwilling to draw down further on its banking facilities it could look to raise cash in the equity markets,” Goldman Sachs warned in a recent note.

In the pub sector, JD Wetherspoon fell 10.3 per cent to 225¾p while Mitchells & Butlers, in which financier Robert Tchenguiz has a 26 per cent stake, slipped 11.1 per cent to 187p.

Traders said pub stocks had been hit by investors being forced to close positions after an Icelandic investment bank increased margin requirements on derivative contracts. This was also a factor in the poor performance of J Sainsbury, down 5 per cent at 313p.

    FTSE 100 in biggest fall since Black Monday, FT, 6.10.2008,






Dow Drops Under 10000

as Bank Woes Persist


OCTOBER 6, 2008
2:28 P.M. ET
The Wall Street Journal


Deepening fear that the global economy is ailing beyond the capacity of policy makers to cure it sent stocks sharply lower on Monday.

The Dow Jones Industrial Average tumbled below the 10000 mark for the first time since October of 2004, recently falling by more than 700 points to roughly 9615. All 30 of the measure's components were in the red, with financial names like Citigroup and American Express tumbling by more than 10% each.

Markets were rattled overnight after German regulators were forced to step in and save Hypo Real Estate Holding, in the latest in a series of bailout for banks in Europe. The move kept concern about further bank failures around the world high and sent European stock markets sliding, setting a bleak tone for trading in the U.S.

Government officials have been scrambling to stanch the bleeding in financial markets. Last week, President George W. Bush signed the $700 billion rescue package for ailing banks into law. And on Monday, the Federal Reserve said it would begin paying interest on commercial banks' reserves and expand its loan program for squeezed financial institutions. But the notion that there will be no quick fix for the problems besetting Wall Street -- and the economy -- appeared to be setting in with investors Monday.

"People are looking at the [stock] market's fundamentals and realizing how long it's going to take to see some real relief," said Doreen Mogavero, president and chief executive of the New York floor brokerage Mogavero Lee & Co. Ms. Mogavero said that Monday's session didn't seem like a round of capitulation, or last-ditch selling to mark a market bottom.

"Yes, it's a big move, but there hasn't been the sort of volume behind it that we'd like to see," in order to confirm that there isn't another wave of sellers still waiting on the sidelines, she said.

Credit markets also continued to show signs of stress. The cost of borrowing overnight U.S. dollar funds in the interbank market had risen to 2.36875%, up from Friday's fixing of 1.99625%. Yields also fell sharply as investors again flocked to U.S. government debt. The yield on three-month Treasury bill fell to near 0.4%, showing that investors are willing to accept almost no returns in exchange for the certainty that they'll get their cash back in hand after marking a short-term loan to the government.

The benchmark 10-year note gained 1-10/32 to yield 3.442% as investors rushed to move money into Treasurys and away from riskier assets like shares.

"This is just about fear right now, and whether stocks are going to close down 200 or 900 points," said Rick Klingman, managing director o fTreasury trading at BNP Paribas.

The S&P 500 was recently down 6.1%, trading at 1032.23. All its sectors fell, led by economically sensitive categories like energy, down 8.9% amid a steep drop in oil prices; basic materials, which slid 7.3%; and industrials, down 5.1%. Bank shares continued to fall, pushing the S&P financial sector down 6.8%.

The Nasdaq Composite Index dropped lost 7.2% to trade at 139.56. The small-stock Russell 2000 was down 6.4%, trading at 579.68.

Oil futures tumbled $5.15 to $88.73 a barrel due to traders' concerns that fuel demand will suffer as the global economy slows in the months ahead. Other raw materials suffered from similar concerns. The broad Dow Jones-AIG Commodity Index was off almost 5% in recent action.

Gold, which is traditionally viewed as an investor haven rather than an industrial resource, was a notable exception to the commodity selloff. Futures on the yellow metal were recently up $33.60 trading at $866.80 per ounce in New York.

In economic news, the Conference Board said its employment trends index, an aggregate of eight labor-market indicators, fell 0.8% to 108.4 in September, down from a revised 109.3 in August. The index is down almost 10% from a year ago, suggesting that the U.S. labor market is likely to deteriorate sharply in the months ahead.

"The deterioration in the Employment Trends Index has become very pronounced, suggesting that the unemployment rate may very well exceed 7% as early as the second quarter of 2009," said Gad Levanon, senior economist at the Conference Board. "The persistent slackening in labor market conditions, worsened by the financial crisis, has reached a level that in the past led to significantly slower wage growth across most industries."

Charles Evans, president of the Fed's Chicago branch, said in a speech at an event sponsored by the Association for Technology in Lost Pines, Texas, that U.S. economic growth is "likely to be quite sluggish" into 2009, with the timeline for any recovery quite uncertain.

The dollar was mixed against major rivals. One euro recently cost $1.3477, down from $1.3806 late Friday. A dollar fetched 100.67 yen, down from 105.14 yen.

—Emily Barrett, Madeleine Lim,

and Stephen Wisnefski contributed to this article.

    Dow Drops Under 10000 as Bank Woes Persist, WSJ, 6.10.2008,






For Stocks,

Worst Single-Day Drop

in Two Decades


September 30, 2008
The New York Times


Even before the opening bell, Monday looked ugly.

But by the time that bell sounded again on the New York Stock Exchange, seven and a half frantic hours later, $1.2 trillion had vanished from the United States stock market.

What had started 24 hours earlier, with a modest sell-off in stock markets in Asia, had turned into Wall Street’s blackest day since the 1987 crash. The broad market, as measured by the Standard & Poor’s 500-stock index, plunged almost 9 percent, its third-biggest decline since World War II. The Dow Jones industrial average fell nearly 778 points, or 6.98 percent, to 10,365.45.

Across Wall Street, no one could quite believe what was happening on the floor — the floor of the House of Representatives, not the New York Exchange.

As lawmakers began to vote on a $700 billion rescue for financial institutions, the Voyageur Asset Management trading desk in Chicago went silent. Money managers gaped at a television screen carrying news that seemed unthinkable: the bill was not going to pass. Shortly after 1:30 p.m., the rescue was rejected.

“You just felt like the world was unraveling,” Ryan Larson, the firm’s senior equity trader, said. “People started to sell and they sold hard. It didn’t matter what you had — you sold.”

Frustration, and then panic, coursed through the markets. Investors feared the decision in Washington would imperil the financial industry, as well as the broader economy.

At the Federal Reserve and other central banks, policy makers were also anxious. Even before the vote on Capitol Hill, central bankers tried to jump-start the credit markets. They offered hundreds of billions of dollars in loans to banks around the world because banks and investors were unwilling to lend to each other. But neither the stock market nor the credit markets appeared to respond.

Just 24 hours earlier, few imagined Monday would play out this way. Treasury Secretary Henry M. Paulson Jr. and the House speaker, Nancy Pelosi, announced Sunday afternoon they had agreed on terms of a bailout.

But while Congressional aides and lawmakers worked on the details, the credit crisis that began more than a year ago in the American mortgage market was setting off new alarms in Europe.

Shortly before 6 p.m. New York time on Sunday, Belgium, the Netherlands and Luxembourg agreed to invest $16.2 billion to rescue a big bank, Fortis. A few hours later, the German government and a group of banks pledged $43 billion to save Hypo Real Estate, a commercial property lender. At 2:50 a.m., news came that the British Treasury had seized the lender Bradford & Bingley and sold the bulk of it to Banco Santander of Spain.

“We will continue to do what is necessary,” a somber Gordon Brown, the British prime minister, told reporters at 10 Downing Street in London.

In Tokyo, where stocks had opened higher in early trading on Monday, worries quickly set in. Traders returned from lunch to reports suggesting the financial crisis was taking a toll on the global economy. Markets across Asia began to sell off.

In Tokyo, the Nikkei 225 sank 1.5 percent. In India, stocks fell nearly 4 percent. In Hong Kong, where a big bank, HSBC, raised key lending rates because of the credit market turmoil, the Hang Seng tumbled nearly 4.3 percent.

As events unfolded in Asia, a major American bank was in trouble. Regulators in Washington were rushing to broker the sale of the Wachovia Corporation to Citigroup or Wells Fargo.

At about 4 a.m., Sheila C. Bair, chairwoman of the Federal Deposit Insurance Corporation, called Citigroup executives to say Wachovia’s banking business was theirs.

On Monday morning, before financial markets in the United States had opened, Federal Reserve officials were alarmed that credit markets in Europe and Asia had spiraled even deeper into crisis on Monday.

Fed officials could see that money markets were freezing up in every part of the world, even though the Fed and other central banks had expanded their emergency lending programs last Thursday. This time, Fed officials felt compelled to provide a true show of force by expanding their existing loan arrangements by an unprecedented $330 billion.

As investors in New York were getting up, the credit markets were again flashing red as banks reported higher borrowing costs. Investors continued to seek safety in Treasuries. The yield on one-year Treasury bills, for instance, fell to almost zero, meaning investors were willing to accept no return just for the assurance that they would get their money back.

When trading opened on the New York Exchange at 9:30 a.m., stocks immediately fell 1 percent.

Worried officials at the Fed announced at 10 a.m. that the central bank would increase to $620 billion its program to lend money through foreign central banks, up from $290 billion, to keep credit flowing. The central bank also said it would double the money it lends out domestically through an auction program to $300 billion.

Many eyes on Wall Street turned to National City, the Cleveland-based bank, which has a $20 billion portfolio of troubled loans it is trying to sell. National City’s shares plummeted 50 percent to $1.50 in early trading, prompting Peter E. Raskind, the bank’s chief executive, to assert that the bank was sound.

“It’s not overly dramatic to say that investors are panicking. You can see it in the market and we can feel it,” Mr. Raskind said in an interview.

In New York, 10 executives at an investment firm, Bessemer Trust, huddled to discuss the markets. A question arose: What would it take to restore confidence to the credit markets? There were few upbeat answers, though one said Citigroup’s takeover of Wachovia could pave the way for more consolidation in banking. “It is the type of solution that makes good sense in these challenging times,” Marc D. Stern, Bessemer Trust ’s chief investment officer, said as he recounted the meeting.

But Mr. Stern and his group would soon be dismayed by what was happening in Washington.

At 1:30 p.m. the House began to vote on the rescue package that Mr. Paulson and Congressional leaders negotiated over the weekend. About 10 minutes later, when it became clear that the legislation was in trouble, the stock market went into a free fall, with the Dow plunging about 400 points in five minutes.

At his home office in Great Neck, N.Y., Edward Yardeni, the investment strategist, received terse e-mail messages from clients and friends. “Is this the end of the world?” one asked. Another sent a simple plea: “Stop the world, I want to get off.”

Mr. Yardeni and other analysts said the action in Washington left many investors discouraged and feeling powerless. “You can come into the office and spend a lot of time researching companies, trying to understand them. You’ve got a portfolio that you think should do well,” he said. “And none of that matters.”

Marc Groz, chief executive of Topos Partners, a hedge fund in Stamford, Conn., put it this way: “It’s frustrating for someone like me because I don’t have a pipeline to what is happening in Washington, D.C.”

The stock market briefly rallied, then slowly lost ground in the afternoon. A flurry of sales minutes before the close sent the Dow down another 200 points, to its lowest level for the day.

Shortly after the closing bell rang on the floor of the Big Board, Mr. Paulson, looking exhausted, spoke to reporters at the White House. He lamented the vote, but vowed to keep pressing Congress for a broad rescue plan to help ease stress in the credit markets.

Following are the results of Monday’s auction of three- and six-month Treasury bills.

Eric Dash and Ben White contributed reporting.

For Stocks, Worst Single-Day Drop in Two Decades, NYT, 30.9.2008,






The Downfall of a California Dreamer


July 29, 2008

The New York Times



PASADENA, Calif. — After his mortgage company nearly crashed a decade ago, Michael W. Perry set a new course. He bought a bank so the company, soon rechristened IndyMac Bank, would never run short of money again.

The financial world now knows how this story ended. Just before 3 p.m. on July 11, federal regulators arrived at Mr. Perry’s headquarters here and seized IndyMac, which was buckling under its burden of bad loans. The debacle, one of the biggest bank failures in American history, could cost the Federal Deposit Insurance Corporation as much as $8 billion. Shareholders have been all but wiped out.

The collapse of IndyMac, one of the nation’s largest mortgage lenders, was the most vivid example to date of the dangers now confronting the nation’s banks and their investors. Two more lenders, both of them relatively small, were taken over by the government last Friday, and many analysts believe more banks will fail as home prices weaken and loan defaults mount.

Fears about the banking industry continue to haunt the stock market. The Standard & Poor’s 500-stock index fell 1.9 percent on Monday, and financial stocks tumbled 4.6 percent.

The F.D.I.C. is still trying to unravel the mess at IndyMac. The tableau of the collapse was shocking, replete with a run on the bank, snaking lines of anxious customers and sober assurances from Washington. Not since the 1980s has an American bank failed so spectacularly.

How could this happen? There has been a lot of finger-pointing. The Office of Thrift Supervision, the federal regulator that oversaw IndyMac, contends that Senator Charles E. Schumer, Democrat of New York, caused a panic among customers by issuing dire warnings about the bank.

Mr. Schumer maintains that the Office of Thrift Supervision was slow to spot the problems at IndyMac, an offshoot of the Countrywide Financial Corporation, the giant mortgage company that has come to symbolize many of the excesses of the subprime era.

But behind the political pyrotechnics is a simple truth: Executives at IndyMac, like many people on both Wall Street and Main Street, apparently never dreamed that home prices might fall. To the contrary, IndyMac made many loans on terms that implicitly assumed prices would keep rising.

Since 2000, IndyMac collected deposits from customers and used the money to make lucrative — and, it turns out, perilous — mortgages a rung above subprime. The bank also let people borrow money without their providing documentation to verify their income and assets.

As long as home prices continued to go up, the company’s strategy was very lucrative for executives, employees and shareholders. Analysts say the boom perpetuated an insatiable hunger for mortgages and a complacency about the risks they posed.

“The sales culture took over, and the sales division really drove the company,” said Paul J. Miller Jr., an analyst at Friedman, Billings, Ramsey.

Mr. Perry, whom friends and co-workers described as a hands-on manager who sometimes personally weighed in on mortgage applications, pushed the boundaries of his trade. But apparently not even Mr. Perry, who spent much of his career at IndyMac and its predecessor companies, saw the trouble until it was too late. He was predicting as recently as February that the bank would not only weather the downturn in the housing market but that it would even turn a profit this year.

Through a spokesman, Mr. Perry declined to comment for this article on the advice of his lawyers.

Formed in 1985 as a small division of Countrywide, IndyMac started making loans in the 1990s and became fully independent in 1997. The company nearly went under when the credit markets seized up in 1998, but Mr. Perry steered the company through that crisis by reducing its reliance on Wall Street financing. In July 2000, he acquired a savings bank to gain access to what was widely presumed to be a more stable source of financing: customers’ deposits.

“He certainly never forgot that experience,” Thomas K. Brown, chief executive of Second Curve Capital, said of IndyMac’s troubles in 1998. Mr. Brown, whose hedge fund had owned 5 percent of IndyMac late last year, described Mr. Perry as an “eternal optimist.”

Mr. Brown said Mr. Perry often referred to IndyMac’s previous hardships by saying, “We have made tough decisions in the past.”

Most of this decade was a golden era for IndyMac, whose profits grew threefold from 2001 to 2006. The company specialized in alternative-A, or alt-A, mortgages, which are made to borrowers with good credit but are not quite as conservative as the prime loans eligible to be bought by Fannie Mae and Freddie Mac, the mortgage giants.

For a long time, Mr. Perry disputed the growing belief that the problems in subprime mortgages would infect alt-A loans.

“That’s like saying that our headquarters in Pasadena is ‘in between’ Los Angeles and Las Vegas,” he said in March 2007. “True enough, but there’s the question of degree: Pasadena is 11 miles northeast of Los Angeles and Las Vegas is 262 miles northeast of Pasadena.”

While alt-A loans have, in fact, defaulted at much lower rates than subprime mortgages, they have nonetheless proved problematic. IndyMac’s biggest problem was a $10 billion portfolio of loans that it had been unable to sell last summer when credit markets froze up.

By the spring of this year, Mr. Perry and his board were working feverishly to raise money, find an acquirer or sell parts of the company, an effort known inside the bank as “Project Iron Man.” Several private equity firms, including Cerberus Capital Management and Oaktree Capital Management, talked to the company, but none of them made a hard offer, according to several people briefed on or involved in the talks.

By late June, IndyMac executives realized no savior would emerge soon, and the Office of Thrift Supervision told the bank it was no longer “well capitalized.” Mr. Perry began laying out plans for closing IndyMac’s mortgage lending business and dismissing half the company’s employees. The bank hoped to reduce its portfolio of loans but continue its profitable reverse-mortgage business to buy time until the housing market stabilized.

What came next stunned IndyMac and its regulators. Mr. Schumer wrote a letter to the Office of Thrift Supervision and F.D.I.C. questioning the bank’s viability. Reports of the letter created a run: In three days, customers withdrew $100 million.

Mr. Schumer later said regulators were “on top of the situation,” but confidence in IndyMac continued to ebb. By Day 11, more than $1.3 billion had been withdrawn from the bank, according to the Office of Thrift Supervision. Many of the customers who withdrew their money had balances of less than $100,000, the maximum amount insured by the F.D.I.C.

“Because there were so few bank failures in recent years, people didn’t fully understand deposit insurance,” said John Bovenzi, the chief operating officer at F.D.I.C. who was appointed chief executive of IndyMac Federal Bank, the government-run successor to IndyMac.

Mr. Bovenzi sat at a conference table in Mr. Perry’s former office, a bare room that had been stripped of the former chief executive’s personal effects save one forlorn plant. In the hallways, business cards of F.D.I.C. officials were taped outside offices, many of which still had names of former IndyMac officials on them. The F.D.I.C. said it has kept all the bank’s former top executives, except Mr. Perry.

In the aftermath of the failure the O.T.S. and Mr. Schumer traded barbs about who was responsible. The O.T.S. director, John Reich, said Mr. Schumer’s remarks “undermined the public confidence essential for a financial institution.” Mr. Schumer retorted that the Office of Thrift Supervision should have moved earlier to check “IndyMac’s poor and loose lending practices.”

Analysts said IndyMac would have gone under or been sold sooner or later, but added that Mr. Schumer’s remarks may have sped up the process by a few months.

IndyMac executives suspected the end was near even before the regulators turned up. Examiners do not warn banks they are coming, but they typically take over failing institutions on Fridays so they can have a weekend to put things in order and reopen under government control on Monday.

As the lines grew outside IndyMac branches during the week of July 7, Mr. Perry talked with an Office of Thrift Supervision official to assess the situation.

“We’ll talk to you on Friday,” the official said, according to one bank official briefed on the call. As word of the call spread through IndyMac, executives began packing their personal belongings.

Stephen Labaton contributed reporting from Washington

and Louise Story from New York.

The Downfall of a California Dreamer,









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