Added: Wednesday, 15 July 2009, 11:10 AM Mecca time, 08:10 AM GMT
The US justice department has launched an inquiry into the credit default swaps market, where complex derivatives are traded largely unregulated.
Credit default swaps helped to bring down the US insurance giant AIG.
They are effectively bets on whether a company will default on its debt.
So-called over-the-counter derivatives - bought and sold by parties outside exchanges - are seen by many as one of the triggers of the global financial crisis that brought down some of Wall Street's biggest names.
As a direct result, pressure is increasing for more stringent regulation of the market.
Mr Geithner has proposed that all standardised derivative contracts be executed on regulated exchanges or regulated electronic trading platform.
The privately traded global derivatives market is worth about $450 trillion (£276 trillion).
Leonard, Raymond, New Hampshire, United States
Added: Monday, 13 July 2009, 09:37 PM Mecca time, 06:37 PM GMT
Nine months into the fiscal year, the federal deficit has topped $1 trillion for the first time.
The imbalance is intensifying fears about higher interest rates and inflation, and already pressuring the value of the dollar. There's also concern about trying to reverse the deficit — by reducing government spending or raising taxes — in the midst of a harsh recession.
The Treasury Department said Monday that the deficit in June totaled $94.3 billion, pushing the total since the budget year started in October to nearly $1.1 trillion.
The deficit has been propelled by the huge sum the government has spent to combat the recession and financial crisis, combined with a sharp decline in tax revenues. Paying for wars in Iraq and Afghanistan also is a major factor.
The country's soaring deficits are making Chinese and other foreign buyers of U.S. debt nervous, which could make them reluctant lenders down the road. It could force the Treasury Department to pay higher interest rates ...
Leonard, Raymond, New Hampshire, United States
Added: Sunday, 12 July 2009, 03:02 PM Mecca time, 12:02 PM GMT
They now want us to opt for a universal currency with the dollar having some preeminence when it has none. It is best to stick to the basket of currencies across regions to reflect the true worth of economies. And who wants broken western economies to dictate to us the way forward a continuation of a failed economic system. We necessarily have to choose a new way forward and it surely is not theirs. No Corporate oriented economies for us just people oriented ones. Development is not stock market figures but poverty eradication without charity.
rainmaker, India
Added: Saturday, 11 July 2009, 08:05 PM Mecca time, 05:05 PM GMT
There is also a question about the roots of the crisis: Did investment banks take greater risks in the past two decades because they knew the Fed could rescue them?
Since March 2008, the central bank's board of governors has invoked its emergency powers at least 19 times: to contain the wreckage of Bear Stearns and ease the fall of American International Group, to preserve Goldman Sachs and Morgan Stanley, to limit losses at Bank of America and Citigroup, to lend more than $1 trillion.
The repeated use of the once-dusty law has surprised and alarmed a wide range of people, including economists and members of Congress. It has even raised worries among presidents of the regional banks that make up the Federal Reserve system.
Leonard, Raymond, New Hampshire, United States
Added: Saturday, 11 July 2009, 01:24 PM Mecca time, 10:24 AM GMT
QUOTATION OF THE DAY
"The credit pendulum is stuck at ‘stupid.’ I am turning down loans every day that my grandfather in his Ponca City, Okla., savings and loan in 1935 would have been happy to make. And he was tough." LOU S. BARNES, an owner of a Colorado mortgage bank.
Leonard, Raymond, New Hampshire, United States
Added: Thursday, 09 July 2009, 04:55 AM Mecca time, 01:55 AM GMT
Leonard,
I was not aware of the specific legislation. Thank you for pointing that out. It's quite ironic considering the goverment had a large hand in the deregulation of the banking sector. What caught them was all the speculation on mortgage securities that over inflated the value. It wasn't the only factor but I believe it played a significant role. Frankly I don't think anyone had a clue this was going to happen. This is one we learned the hard way. We will all be paying for it for years to come. Personally I am torn regarding government intervention. On the one hand I think a business should fail if it's business model is flawed. On the flip side I do understand the intervention to prop industries that are to inter connected to the economy. For instance, if AIG had failed it would have had a domino effect reaching across the globe. We also must not forget consumer confidence which I believed had a lot to do with the goverment jumpin in.
wilbur , chicag0, United States
Added: Wednesday, 08 July 2009, 07:13 AM Mecca time, 04:13 AM GMT
So please tell me, Aladdin, how good things are if California is about to hand out IOU's? Seems to me what is good for the goose is good for the gander ... how well do you think it would work if the tax-payer sent IOU to State and Federal government to pay income-tax? ... LOL.
Leonard, Raymond, New Hampshire, United States
Added: Tuesday, 07 July 2009, 04:22 PM Mecca time, 01:22 PM GMT
Yeah, wilbur, I don't know what to think about this all now. Personally, I think we are seeing a hostile-takeover by the Federal Reserve. The reason I believe this is in my reading I discovered a little known piece of legislation that was passed shortly after the Savings & Loan scandal that gives the Fed unusual and pretty much unlimited power to bail-out Wall Street and Banks even if they cause a financial crisis. Congress has little power of oversight and the tax-payers have absolutely no say in the matter, but we all will all pay for it to the second and third generation.
On the day before Thanksgiving in 1991, the U.S. Senate voted to vastly expand the emergency powers of the Federal Reserve.
Almost no one noticed.
The 1991 legislation, authored by Sen. Christopher J. Dodd (D-Conn.), was requested by Goldman Sachs and other Wall Street firms in the wake of the 1987 market crisis, and it would save some of them a generation later.
Leonard, Raymond, New Hampshire, United States
Added: Monday, 06 July 2009, 07:45 AM Mecca time, 04:45 AM GMT
Leonard,
Agree with your points. Small business has taken a beating in the US and the large corporations are the ones often taking them out. On the other hand we have to keep in mind 80% of all businesses fail including small ones. We do need to reign in the large corporations that practice what I call "lawfare." An example is GE's medical MRI business. They blantantly stole the technology from a small organization and surmized correctly it would be cheaper to steal it than make it themselves. The smaller firm, who I can't remember, fought valiantly but was forced to go under even though a judge ruled in their favor. GE ended up buying them thus ending it. This is not the norm but any business owner has to go in with the mentality of protecting his intellectual property rights. I own part of a small software company and I can say for a fact we have had large corporations try to muscle us. Its a fact and we do need more protection form the government to stop this.
wilbur , chicag0, United States
Added: Sunday, 05 July 2009, 06:22 AM Mecca time, 03:22 AM GMT
Mike Barry, USA: Rainmaker is OK. He/She doesn't really believe most of what he/she says. There are several posters here who don't actually scrutinize anything they read or hear. They simply hate the U.S. and Israel, and throw out any conspiracy theory or bogus statement they see or hear that is against the U.S. or Israel as "fact". There is a certain type of person that likes to say things that are negative about the entity they hate in a public forum, in the hopes that it will somehow get perhaps one person in said entity (e.g. Israel or the U.S.) to doubt their own reality. Not a very good strategy, but they keep trying. In the meantime, the ignore the abject poverty and corruption all around them in their own countries. Interesting pathology.
