Up the Hill… by Milota Sidorova

Since Congress has passed the bailout plan, it seems the world press doesn’t handle anything apart the credit crisis. This ‘financial socialism’ is of course not exactly what might market economy demanded for, however, it may be at least kind of a theoretical assure for people’s savings.
Well, now more than ever, American government talks seriously about more supervision and regulation over Wall Street. The massive and general reform is more than necessary, if they don’t want to stay in position of ‘financial savior’ on the call.
What’s a fact is, the rest of the world is keeping busy over solving the credit crunch labeled ‘Made in America’. And what’s might get someone crazy is a fact, the U.S. are dealing this bomb the best.
At least they have experienced this several times.

Since 1934 Federal Deposit Insurance Corporation has closed more than 3,568 banks and almost 82 percent of them failed during troubled and nervous savings and loan crisis in late 80’s. Early 1990 have cost American taxpayers somewhere between $170 and $205 billion. That time there’s been a magnificent collapse of hundreds of federal insurred companies. Statistics say of 10 percent of total financial market have figured on the FDIC problem list.
Does the situation seem different nowdays?
Of course, the government handles far less institution than in S&L crisis. However, the banks have been fusing and spreading and at the end we have financial giants whose failures consist serious damages.

Naturally there’s a reason to celebrate the approval of delayed controversial bailout, but many believe hundreds of banks face their quick bankrupcy further year. Why?
Well, many of them have troubled construction loans and different types of endangered assets that, unfortunately are not the subject of governmental aid.
According press FDIC is about to clean up the toxic assets which may cost in the moment up to $200 billion. FDIC actually operates with $45 billion, so it’s more than unevitable to hang on Federal Treasury, that is complicating the whole chain.

According Bauer Financial more than 426 institution have been struggling the major problems on June 30. 117 of them have been put on the problem list. Their debt has totalled over $78 billion, the sum not that difficult to handle.
One may say of great fortune to exclude Wachovia and Washinghton Mutual National Bank from the FED bill. In case their troubles would touch the sky of $1 trillion, far more than the whole sum proposed by Paulson and co.
Wachovia have made a deal with Fargo&Co while WaMu has enlarged J&P Morgan Chase portfolio.

Naturally the credit crunch works as a radical clean up system here. The weak one fail to determine the monopoly of the surviors. J&P Morgan, Citigroup and Bank of America are now the ones to rule the economical universe.

As for the ordinary citizen, good news may be the fact smaller existing banks assure relatively safe place to carry their money. In fact from 2,300 homeowners there’s been only one in foreclosure.

As for Congress, several hearings have been put on the schedule next months. At first – investigation of failure Lehman, AIG and the rest, then the role of regulators and credit rating agencies and their contribution to the market, the importance of hedge funds and complex derivates supervision and finally the talks of Freddie Mac and Fannie Mae fate. They will possibly become smaller and easier to help or will become fully privatized.


related story: http://news.yahoo.com/s/ap/20081005/ap_on_bi_ge/shaky_banks;_ylt=AgU5CCja3YJ0U_CvaE1U_Das0NUE

by Milota Sidorova for PocketNews (http://pocketnews.tv)

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These news are original content from young talents around the world and are selected for you by Chris Cantell.


edited by Beata Biskova