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The Federal Reserve expanded deals early Friday morning with two of its counterparts in Europe in order to make an extra $13 billion available to banks there, after reporting increased lending to U.S. banks and Wall Street firms.
The deal will have the Fed provide $10 billion to the European Central Bank and $3 billion to the Swiss National Bank. In return, it will receive a reciprocal amount of foreign currency from each country.
The $13 billion comes on top of the $277 billion in such swap deals that had previously been announced, including $110 billion with the ECB and $27 billion with the Swiss National Bank.
Friday's action helps provide dollars to foreign banks that needed the U.S. currency to transact business but had been unable to access the Fed directly the way U.S. banks can.
The three central banks said the latest action is designed to help banks that needed access to the cash to close transactions at the end of the third quarter, which concludes on Tuesday.
The Fed has been taking steps to pump dollars into the U.S. financial system as well, lending out more than $140 billion over the course of the last week.
Figures released Thursday showed that borrowing by Wall Street securities firms totaled $105.7 billion as of Wednesday, up from $59.8 billion a week earlier.
In addition, under an emergency program unveiled by the banks last week, commercial banks borrowed $72.7 billion through Wednesday in order to buy commercial paper from money-market mutual funds.
And loans through the traditional discount window rose to $39.3 billion, up $5.9 billion from a week earlier. Other credit extensions jumped by $16 billion to $44 billion.
The moves come as banks and Wall Street firms have become reluctant to lend money to each other, or to customers. There are reports of banks hoarding cash out of concerns about their own future as well as uncertainty about the financial condition of other institutions.
That resulting freezing of credit and financial markets has prompted the Treasury Department and Fed to push for a $700 billion bailout package that would have the government buy mortgage-backed securities whose value has plunged in the face of sliding home prices and climbing foreclosures.
Congressional negotiators were reportedly close to a deal Thursday to win bipartisan approval of the bailout package but objections from House Republicans have thrown the status of those talks into doubt.
The announcement also came the day after Washington Mutual was taken over by the Federal Deposit Insurance Corp., making it the largest bank failure in U.S. history. The nation's largest thrift was then sold to JPMorgan Chase
I will cut tens of billions of dollars in wasteful spending. ... is finally amending reporting from yesterday that claimed there was a deal on the bailout ... Pundits can throw out all those "5 keys to a McCain win" columns they wrote ...
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Source: Weekly Standard
Ed Rendell has invested millions of dollars in clean coal ... match for credit, Dodd and Barney Frank got out in front this morning, declaring a deal on basic principles for a bailout before ... shale development on to the CR appropriations bill despite ...
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Source: Weekly Standard
How We Can Fix a Crisis We Did Not Create
The "give me your dollars" crowd will tell you this bailout is necessary and it ... an informed, cohesive opinion on this bailout. While it would be nice if the government can work out as sweet of a deal ... No matter how much liquidity the Fed pumps into ...
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Source: Motley Fool
WSJ/NBC Poll: Voters Doubt Palin’s Qualifications to Be President
Maybe their plan is to put people out of work so they have time to vote ... Despite her lack of knowledge/experience she is decisive. Is she qualified to be ... When the Rep. wanted to rush through the “bailout” and said that you could not ...
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Source: Wall Street Journal
Only Real Fix Is Regulatory, Analysts Say
For a year, the Fed and Treasury have been propping up the markets ... If they want this half trillion bailout it should come with some conditions. 1) Out of Iraq and all the wastefull ... peanut butter, aspirin by the cae, a still, six twelve gager pumps ...
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Source: Common Dreams
The details of the bailout deal
From Office of Speaker Nancy Pelosi -- Sept. 28, 2008
IMPROVING THE FINANCIAL RESCUE LEGISLATION
Significant bipartisan work has built consensus around dramatic improvements to the original Bush-Paulson plan to stabilize American financial markets -- including cutting in half the Administration's initial request for $700 billion and requiring Congressional review for any future commitment of taxpayers' funds. If the government loses money, the financial industry will pay back the taxpayers.
3 Phases of a Financial Rescue with Strong Taxpayer Protections
# Reinvest in the troubled financial markets … to stabilize our economy and insulate Main Street from Wall Street
# Reimburse the taxpayer … through ownership of shares and appreciation in the value of purchased assets
# Reform business-as-usual on Wall Street … strong Congressional oversight and no golden parachutes
CRITICAL IMPROVEMENTS TO THE RESCUE PLAN
Democrats have insisted from day one on substantial changes to make the Bush-Paulson plan acceptable -- protecting American taxpayers and Main Street -- and these elements will be included in the legislation
Protection for taxpayers, ensuring THEY share IN ANY profits
# Cuts the payment of $700 billion in half and conditions future payments on Congressional review
# Gives taxpayers an ownership stake and profit-making opportunities with participating companies
# Puts taxpayers first in line to recover assets if participating company fails
# Guarantees taxpayers are repaid in full -- if other protections have not actually produced a profit
# Allows the government to purchase troubled assets from pension plans, local governments, and small banks that serve low- and middle-income families
Limits on excessive compensation for CEOs and executives
New restrictions on CEO and executive compensation for participating companies:
# No multi-million dollar golden parachutes
# Limits CEO compensation that encourages unnecessary risk-taking
# Recovers bonuses paid based on promised gains that later turn out to be false or inaccurate
Strong independent oversight and transparency
Four separate independent oversight entities or processes to protect the taxpayer
# A strong oversight board appointed by bipartisan leaders of Congress
# A GAO presence at Treasury to oversee the program and conduct audits to ensure strong internal controls, and to prevent waste, fraud, and abuse
# An independent Inspector General to monitor the Treasury Secretary's decisions
Transparency -- requiring posting of transactions online -- to help jumpstart private sector demand
# Meaningful judicial review of the Treasury Secretary's actions
Help to prevent home foreclosures crippling the American economy
# The government can use its power as the owner of mortgages and mortgage backed securities to facilitate loan modifications (such as, reduced principal or interest rate, lengthened time to pay back the mortgage) to help reduce the 2 million projected foreclosures in the next year
# Extends provision (passed earlier in this Congress) to stop tax liability on mortgage foreclosures
# Helps save small businesses that need credit by aiding small community banks hurt by the mortgage crisis—allowing these banks to deduct losses from investments in Fannie Mae and Freddie Mac stocks
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