http://www.washingtonpost.com/…

Citigroup has agreed to buy Wachovia bank in a deal brokered by the Federal Deposit Insurance Corporation to avoid another major corporate failure in the midst of the ongoing financial crisis.

The FDIC announced the deal on its Web site this morning. No price for the transaction was included in the announcement. But the FDIC said that the deal hinged on a loss sharing arrangement between Citigroup and the FDIC, the agency responsible for insuring bank deposits.

Wachovia has been saddled by mortgage-related losses. Under the terms of the deal, Citigroup will absorb up to $42 billion of losses on a $312 billion pool of loans. The FDIC will be responsible for any losses beyond that, but was given $12 billion in Citigroup preferred stock and warrants in return for that guaranty.

The FDIC statement emphasized that Wachovia “did not fail,” and that its branches and other offices will be open as usual.

http://www.bloomberg.com/…

European governments stepped in to rescue Fortis, Bradford & Bingley Plc, and Hypo Real Estate Holding AG as tremors from the U.S. credit crisis reverberated around the world.

The U.K. Treasury seized Bradford & Bingley, Britain’s biggest lender to landlords, while governments in Belgium, the Netherlands and Luxembourg threw an 11.2 billion-euro ($16.3 billion) lifeline to Fortis. Germany guaranteed a loan to Hypo.

The interventions exposed how fallout from the crisis that drove Lehman Brothers Holdings Inc. into bankruptcy and prompted a $700 billion U.S. bank-rescue package has gone global. It also added urgency to negotiations among European policy makers as to how they deal with banking collapses.

“The precarious global environment means the weakest links in Europe are now falling,” said Mamoun Tazi, an analyst at MF Global Securities Ltd. in London. “If banks continue not to lend to each other we’ll see more failures.”

More insider deals, more centralization, more government interference and control.

This is what happens when you have a system based on debt on a large scale. It’s inherently insolvent.

Update:

This is cute…

Federal Reserve Chairman Ben Bernanke said in a statement the FDIC action “demonstrates our government’s unwavering commitment to financial and economic stability.”

http://www.breitbart.com/…

The US Senate Saturday approved 25 billion dollars in loan guarantees for the financially strapped US auto industry, intended to spark a wave of automotive innovation.

The loan guarantees were included in a continuing resolution that included funding for the US government and the wars in Iraq and Afghanistan.

President George W. Bush has indicated that he intends to sign the bill.

“We’re very pleased Congress has chosen to act at this critical time,” said Greg Martin, director of communications for General Motors Corp’s Washington office.

GM had been subject of much speculation that it could be forced into bankruptcy.

The bill, which was approved by the House of Representatives on Wednesday, are the first loan guarantees for US carmakers since Congress approved a similar 675 million dollar measure for Chrysler Corp. in 1980.

Chrysler Chairman Robert Nardelli, however, said this week the loan guarantees should not be considered a rescue package for struggling carmakers. “This is not a bailout,” he said.

Under provisions of the new legislation, not only US carmakers are eligible for the guarantees but also suppliers and foreign automakers with plants in the United States that are more than 20 years old — Nissan and Honda’s US operations qualify.

Not a bailout?

Bailout in economics and finance is a term used to describe a situation where a bankrupt or nearly bankrupt entity, such as a corporation or a bank, is given a fresh injection of liquidity, in order to meet its short term obligations. Often bailouts are by governments, or by consortia of investors who demand control over the entity as the price for injecting funds.

Obviously Mr. Robert Nardelli and I have different definitions of ‘bailout.’

How about we let them burn just like the banks? The unions want to complain about it? Let’em! They have brought this on themselves by using the guns of government to minipulate and regulate the auto industry out of competitiveness. Though luck.

http://www.lewrockwell.com/…

The Federal Reserve has released statistics showing a dramatic change in bank reserves in the two-week period September 10 to September 24.

Banks are now holding reserves that are 268% of requirements. Typically, and as recently as August, reserves are 4 to 5% over requirements.

Banks normally make overnight loans of “excess” reserves to other banks short of reserves. Now they aren’t. In times like these, bankers are like all conservatives: They start to worry more about return OF principal than return ON principal. If they make an overnight loan to the next bank to fail, they might not be repaid in a timely manner, or ever.

This could be the “lockup” that Congressmen have referred to when reporting on the sobering closed-door briefings from the Billionaire Bailout Boys.

There are many other things worth noting. As mentioned earlier, the monetary base had a VERY large increase. It went up by over 7.6% in two weeks!

The Mogambo Guru will be needing CPR!. That’s a very large creation of money, well into hyperinflation territory. Compounding 7.6% in two weeks for 26 periods gives a 680% increase per year.

I’d like to hope that the Fed will reduce the monetary base, but of course that is difficult, and this is an election year, and there are so many good reasons why creating ever greater amounts of money seems like a good idea at the time…

Lets hope they are smart enough to not to push things that far.

http://www.bloomberg.com/…

JPMorgan Chase & Co., the third- biggest U.S. bank by assets, agreed to acquire Washington Mutual Inc.’s deposits and branches for $1.9 billion after regulators seized the thrift in the biggest bank failure in U.S. history.

Customers withdrew $16.7 billion from WaMu accounts since Sept. 16, leaving the Seattle-based bank “unsound,” the Office of Thrift Supervision said today. WaMu’s branches will open tomorrow and customers will have full access to all their accounts, Sheila Bair, chairman of the Federal Deposit Insurance Corp., said on a conference call.

“JPMorgan is getting a steal compared with what they were going to pay,” said Scott Adams, a pension and investment analyst at the American Federation of State, County and Municipal Employees in Oakland, California, which owns WaMu shares. “It’s very tragic.”

WaMu collapsed as its credit rating was slashed to junk and its stock price tumbled. Facing $19 billion of losses on soured mortgage loans, the lender put itself up for sale last week after firing CEO Kerry Killinger this month. The bank named Alan Fishman as his replacement on Sept. 8, agreeing to pay him a $7.5 million signing bonus and $1 million salary.

JPMorgan won’t acquire WaMu’s liabilities, including claims by shareholders and subordinated and senior debt holders, the FDIC said.

The consolidation continues. Any bets on who’s next?

Dr. Ron Paul introduced this bill on June 15th of 2007 but it’s particularly notable now due to the current situation.

http://thomas.loc.gov/…

Federal Reserve Board Abolition Act (Introduced in House)

HR 2755 IH

110th CONGRESS1st Session H. R. 2755

To abolish the Board of Governors of the Federal Reserve System and the Federal reserve banks, to repeal the Federal Reserve Act, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

June 15, 2007

Mr. PAUL introduced the following bill; which was referred to the Committee on Financial Services

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A BILLTo abolish the Board of Governors of the Federal Reserve System and the Federal reserve banks, to repeal the Federal Reserve Act, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Federal Reserve Board Abolition Act’.

SEC. 2. FEDERAL RESERVE BOARD ABOLISHED.

(a) In General- Effective at the end of the 1-year period beginning on the date of the enactment of this Act, the Board of Governors of the Federal Reserve System and each Federal reserve bank are hereby abolished.

(b) Repeal of Federal Reserve Act- Effective at the end of the 1-year period beginning on the date of the enactment of this Act, the Federal Reserve Act is hereby repealed.

(c) Disposition of Affairs-

• (1) MANAGEMENT DURING DISSOLUTION PERIOD- During the 1-year period referred to in subsection (a), the Chairman of the Board of Governors of the Federal Reserve System–

• • (A) shall, for the sole purpose of winding up the affairs of the Board of Governors of the Federal Reserve System and the Federal reserve banks–

• • • (i) manage the employees of the Board and each such bank and provide for the payment of compensation and benefits of any such employee which accrue before the position of such employee is abolished; and

• • • (ii) manage the assets and liabilities of the Board and each such bank until such assets and liabilities are liquidated or assumed by the Secretary of the Treasury in accordance with this subsection; and

• • (B) may take such other action as may be necessary, subject to the approval of the Secretary of the Treasury, to wind up the affairs of the Board and the Federal reserve banks.

• (2) LIQUIDATION OF ASSETS-

• • (A) IN GENERAL- The Director of the Office of Management and Budget shall liquidate all assets of the Board and the Federal reserve banks in an orderly manner so as to achieve as expeditious a liquidation as may be practical while maximizing the return to the Treasury.

• • (B) TRANSFER TO TREASURY- After satisfying all claims against the Board and any Federal reserve bank which are accepted by the Director of the Office of Management and Budget and redeeming the stock of such banks, the net proceeds of the liquidation under subparagraph (A) shall be transferred to the Secretary of the Treasury and deposited in the General Fund of the Treasury.

• (3) ASSUMPTION OF LIABILITIES- All outstanding liabilities of the Board of Governors of the Federal Reserve System and the Federal reserve banks at the time such entities are abolished, including any liability for retirement and other benefits for former officers and employees of the Board or any such bank in accordance with employee retirement and benefit programs of the Board and any such bank, shall become the liability of the Secretary of the Treasury and shall be paid from amounts deposited in the general fund pursuant to paragraph (2) which are hereby appropriated for such purpose until all such liabilities are satisfied.

(d) Report- At the end of the 18-month period beginning on the date of the enactment of this Act, the Secretary of the Treasury and the Director of the Office of Management and Budget shall submit a joint report to the Congress containing a detailed description of the actions taken to implement this Act and any actions or issues relating to such implementation that remain uncompleted or unresolved as of the date of the report.

Wouldn’t it be nice if this bill actually picked up even one cosponsor?

Is it over yet?!

H/T to Anthony Gregory over at LewRockwell.com/blog