Financial Crisis Understanding From the Ground Up (Part 2)
What is the relationship between the Federal Reserve and banks
Firstly, here is the quote of definition from the Federal Reserve homepage:
“What is the Federal Reserve System?
The Federal Reserve System, often referred to as the Federal Reserve or simply “the Fed,” is the central bank of the United States. It was created by Congress to provide the nation with a safer, more flexible, and more stable monetary and financial system. Over the years, its role has evolved and expanded.”
What are the Federal Reserve’s responsibilities?
Today, the Federal Reserve’s responsibilities fall into four general areas:
* conducting the nation’s monetary policy by influencing money and credit conditions in the economy in pursuit of full employment and stable prices
* supervising and regulating banking institutions to ensure the safety and soundness of the nation’s banking and financial system and to protect the credit rights of consumers Read more
What Does the AIG Bailout Mean
On Sunday, September 14, the government drew a line in the sand on Lehman Brothers. After orchestrating a bailout of Bear Stearns by JP Morgan (with tens of billions in guarantees) the precedent was set – investment firms in trouble could simply go to the feds. The moral hazard, a term that is suddenly in vogue now when it should have been in vogue in 2005 and 2006, the bailout created was beginning to affect investor thinking. Without risk of failure reckless behavior is encouraged, and the actions of a few managers on Wall Street will be paid for by taxpayers.
So the line was drawn with Lehman. No bailout. It was the right move to restore the natural order of economics.
Two days later the government erased its line in the sand and gave an unbelievable $85 billion in emergency loans to AIG. What happened?
Fear is the answer. In response to the Lehman bankruptcy stock markets in the US and all over the world tanked. The sell-off was the most severe since 2001. But the stock market fear was not the fear the Fed was really worried about with AIG. Read more
12 Tips to Safely Borrow Money Online
photo credit: HAMED MASOUMI
It is a toss up sometimes if our experiences are going to be pleasant or not. When borrowing money online, you must have some things in mind before you pick a lender.
A customer needs to be informed and ready to ask important questions regarding their transaction to safeguard themselves. There are a few quick and easy things you can do to ensure that your loan application goes smoothly and ensure that you are protected from fraud.
1. Is the Company Real or Just a Website?
Real companies will have a physical address listed on their website. This information should be easily found and not hard to locate at all. Be wary of post office box mailing addresses. Compare the address to a listing in the yellow pages online or call the phone number to make sure it is not fake.
2. Where Are They Located? Read more
My Two Cents on the Financial Crisis
As an options and currency trader, I’m had to learn a little about economics over the years, and in fact, the study of money, how it works and why, has been a consummate passion since I was a kid. To be a successful trader, its imperative you understand some basic things about economics, so for what its worth, here is my take on the financial crisis, how we got here, and a few ideas for a solution.
When Regan got elected president in 1980, he immediately did three things that planted the seeds of destruction that has finally come home to haunt us. It was only a matter of time, because in all the years since, no administration has done anything to change the infrastructure of the banking system and how real estate financing and ownership is done in this country Read more
Overcome Business Financial Crisis with Small Business Loan
Small business loan has been designed in such manner to cater the financial needs of a small business. Every business needs funds for smooth and proper functioning of its, operating business cycle. But, it may be possible that such situation arises which affects the functioning of business cycle such as losses, or changes in the market conditions. In order to overcome such situations, business needs sufficient funds. Small business loan is one the appropriate mode for business to overcome such crisis situation.
Small business loan is used to satisfy business needs and requirements. Some of them are:
•To start a new venture
•Consolidating business debts
•Buying machinery and equipments
•Expanding business and etc.
Sometimes, it may be possible that person is misguided by the lender. And, lender takes such action in order to make his profit. Read more
Get Ready For the Global Financial Crisis
The failure of major US investment banks and insurance companies, and sharp declines in stock market indexes are affected the value of the world’s major currencies. At present, major banks, central bankers, hedge funds, and home-based investors are in uncertain condition. Generally, when people feel unsure about market direction they will sell off their riskier assets and they buy safer investments.
When investor confidence collapse they will start buying US government debt. This is brings benefits to U.S dollar because they need dollars in order to buy US Treasury’s. Investors are buying US Treasurys, which are viewed as safe investments because they are backed by the US Government. The riskiest investments have produced the biggest returns. This is the art of investing, the more risk you take, the larger your potential returns. Read more
300 Points Lost on Wall Street As Investors Fear Recession
Stock markets moved lower on Friday around the world, as investors are liquidating risky positions, mounting evidence of global recession.
U.S stock indexes fell 4 percent, European stocks fell 6.5 percent and Japan’s Nikkei plunged 9.6 percent.
Oil moved lower as well to $63 per barrel while commodities copper to zinc, sugar and coffee were battered by sharp selling.
The gloomy outlook convinced investors that economy is headed for a severe recession despite government efforts to help financial system. Investors have been saying that we are in recession and this is time to realize that we are in recession right now. Read more
2nd Bailout Plan of $40 Billion Plan to Help You Refinance
The Federal Government is working on $40 billion plan to help homeowners refinance their mortgage and avoid foreclosure.
Sheila Bair, chairman of the Federal Deposit Insurance Corp., told the Senate Banking Committee that the government can do more to help homeowners to avoid foreclosure.
“Specifically, the government could establish standards for loan modifications and provide guarantees for loans meeting those standards,” Bair said. The FDIC is working “closely and creatively” with the Treasury Department on such a plan, she said.
First bailout package of $250 billion allows government buy preferred shares directly from banks in return for injected capital. Nine of the largest U.S banks were signed into $125 billion capital infusion. Read more
Financial Economic Crisis & Bailout Bill – What to Expect 2008
There is no doubt the US is in a great economical financial crisis, probably the worst since the ‘Great Depression’. But one can’t help but ask; just how bad are things going to get? And exactly who is going to feel the worst of this crisis?
The sure thing you can bet on is that taxes are going to go up and the financial burden of this bailout will be felt nationwide. It will be felt not only by the banks themselves (nationwide), but their infrastructures and communities as well. Even the auto loan industry and credit card companies are at risk as well as insurance companies, as individuals drop existing policies and refused to take on new ones.
About 9.8 million people or 7% of the American workforce are employed in the financial, real estate, and the insurance sectors and they have an even larger spending potential. Read more
The Stock Market Collapse of 2008 – Why the World Has Not Ended
The weekend party conversation filled itself with the speech of the Armageddon. More than one person told me in no uncertain terms that the world was coming to an end. My answer to friends, clients and family includes three facts. One, we’ve been here before. Two, great American companies still sell stuff to people. Three, cash cannot stay cash for long. Let me explain.
First, we’ve seen this all before and the world is still here. Calm down. In fact, in my experience as an investment advisor two important dates remind me to stay cool. In October 1987 I sat in my office wondering if the world was falling off a cliff. The market fell 22% in one day. This would be today’s equivalent of a one day drop of 2300 points! But, exactly one year later on Oct. 19, 1988 the market was up 23%!
More recently, also in October, but this time in 2002, Read more
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