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.bloomberg.com/…

Morgan Stanley and Goldman have defended their business model, saying they have adequate capital and don’t need the deposit funding that banks have. Mack, 63, lambasted short sellers for pushing his firm’s shares lower.

In a memo to employees yesterday, Mack said the management committee is “taking every step possible to stop this irresponsible action in the market” and urged employees to contact clients to reassure them that the firm is performing strongly and has plenty of capital.

“There is no rational basis for the movements in our stock or credit-default spreads,” Mack wrote in the memo. “We’re in the midst of a market controlled by fear and rumors, and short sellers are driving our stock down.”

Things are bad and people don’t want to lose their investments. That is rational behavior. As for the short sellers… also rational. They expect prices to drop and wish to take advantage of that. It bugs me when individuals use the word rational in this way. Which is really “I don’t understand what’s going on or wish to excuse or diminish the action by claiming no one understands.” By definition those actions are rational.

The rumors surely are abundant. Who’s merging with who? Who’s got Morgan Stanley? Is it Wachovia? Citic Group? HSBC? Wells Fargo? JPMorgan Chase? Seems like people are just throwing out names. “What banks still exist? Yeah that one will buy them!” I’m guessing the reason Goldman isn’t getting this kind of attention is because they are a larger firm.

According to their press release MS has $170+ billion liquid. Some, months ago, was criticizing MS for having that much on hand as it would hurt their earnings just sitting around. They had a good quarter considering the environment. Goldman did relatively worse but still is in an decent position overall. It seems to me there is some game going on. As if there are forces trying to make these firms merge with a bank. Both firms’ credit default swaps are at 10ish levels below what Moody has rated them for which would put them at junk levels and their stocks plummeted on what looks to me to be nothing but positive news.

Unless GS and MS are lying about their liquid assets and the market knows something I don’t… I can’t help but feel like something bigger is going on. Perhaps it’s is just fear and shorters, people selling off to invest into safer things (gold stocks were up 7-12% yesterday) and those furthering the issue by taking advantage of it. With language like this I’m concerned the industry will become even that much more regulated and the world will be thrust further into financial crisis.

So they gots to go.  Such is the case in East Harlem.  From Shagya blog:

From London’s Grosvenor Square you can’t see East Harlem, but you can buy it. For £250 million, 47 buildings, and 1,137 homes at a time. That, at least, was supposed to be the deal for UK-based investment bank Dawnay Day Group when it reached across the ocean last March and snatched up entire blocks of this historic neighborhood of low-income immigrants ­ one of the last such communities left in Dawnay Day Group’s plan follows the typical logic of displacement for “development,” a logic well known both to real estate profiteers and to the poor people they displace.

Here is the full blog post.  It’s nice to see people fighting back.  Here’s a radical thought, if a family is making use of a scarce resource such as an apartment and the landlord is not and cannot use the apartment for its primary purpose then the family possesses the apartment.  It sickens me to see things under-utilized because people with capital choose to sit on them.  Let the property rights fracas ensue.

http://www.bloomberg.com/…

The cost of protecting against losses on Treasuries rose to the highest in almost four months on speculation any financial support for mortgage lenders Fannie Mae and Freddie Mac may cost the U.S. government its AAA rating.

Credit-default swaps on Treasuries increased 4 basis points to 18, according to CMA Datavision prices at 2:30 p.m. in London. The 10-year contracts are near the record 19 basis points when the Federal Reserve backed the bailout of New York- based brokerage Bear Stearns Cos. on March 17.

Senior Bush administration officials are considering a government takeover of one or both mortgage lenders, according to a person familiar with the discussions. Fannie Mae and Freddie Mac have about $5.2 trillion in debt outstanding, exceeding the Treasury’s $4.6 trillion in notes. Standard & Poor’s said in April that possible support of government- sponsored lenders posed a threat to the government’s top rating.

“The ratings agencies said the risk for the U.S., if it bails out Fannie and Freddie, is it could lose its AAA rating,” said Andrea Cicione, a London-based credit strategist at BNP Paribas SA. “It is clearly a possibility, albeit a remote one.”

Investor speculation the government will provide support helped drive down the cost of default protection on the mortgage companies’ senior debt. Credit-default swaps on Fannie Mae dropped 17 basis points to 62 and contracts on Freddie Mac fell 23.5 to 55, according to CMA.

Treasuries fell the most in three weeks, increasing the yield on the benchmark two-year note by 8 basis points to 2.49 percent, according to bond broker BGCantor Market Data.

Shares in Washington-based Fannie Mae and Arlington, Virginia-based Freddie Mac tumbled for a third day on concern the firms don’t have enough capital to offset writedowns. Their failure would deepen a housing slump that already is the worst since the Great Depression.

The companies, which own or guarantee about half of the $12 trillion of U.S. mortgages, may be able to count on a federal lifeline because they are too big for the government to allow them to fail, leading Republican and Democratic lawmakers said.

This is what government intervention gets you. Sit back and enjoy it. You’re paying for it.

http://news.bbc.co.uk/…

The Oasis guitarist said it was a “pity scumbags are taking over our streets”, and claimed video games were partly to blame for violence.

He said: “In my day, status was trying to be somebody, do you know what I mean, not trying to kill somebody?”

The star said knife crime was a problem across the UK, not just in London.

The 41-year-old added: “I was up in Liverpool for a week a couple of weeks ago and even on the news there it’s every single night.

“I don’t even know what Cameron or Gordon Brown are going to do about it. I was watching a documentary on Panorama and another one about kids carrying knives and violence.

“One of the lads, a little lad, made a telling comment.

“The guy said, ‘Do you not think there’s anything better for you in life?’

“And he said, ‘Yeah, there probably is but I’ve never known anything else’.”

Gallagher also revealed that he and partner Sarah McDonald were worried about their children growing up and said they talked about knife crime in bed at night.

“People say it’s through violent video games and I guess that’s got something to do with it.

“If kids are sitting up all night smoking super skunk [cannabis] and they come so desensitised to crime because they’re playing these video games, it’s really, really scary.”

Eighteen teenagers have been murdered in London so far this year.

In response, the capital’s Metropolitan police force have set up a task force of 75 officers, dedicated to fighting knife crime.

My theory? The warfare/welfare state is sucking the responsibility and drive out of these kids and they have nothing to strive for. That is what is leading to the increase in knife crime. That and the ban on guns probably doesn’t help as it makes it easier likely to get a knife to commit your violent crime then a gun. At least for the lower end crime. I’m not claiming guns aren’t still relatively easy to get. In any case… if videogames and pot made kids want to stab people… the USA would have several million of them running around.

Record prices have prompted a slew of bills to curtail the role of investors, but traders say they could backfire:

NEW YORK (CNNMoney.com) — Fed up with soaring oil prices and a chorus of people blaming Wall Street speculators, Congress is considering a host of rules aimed at limiting the inflow of investor money into oil contracts.

But oil traders urge caution. While more disclosure is a good thing, they say making it harder for speculators to invest in oil futures could have the opposite effect intended, and send prices higher.

In light of oil’s phenomenal climb from under $50 a barrel to nearly $140 in less than 18 months - and the public belief that Wall Street traders were behind the rise - Congress is awash in bills that attempt to limit the role of speculators. Several have bipartisan support and could soon become law.

“In two days, the price of oil rose $16,” said Sen. Richard Durbin, D-Ill., at a joint hearing of two Senate panels on oil speculation Tuesday. “Did I miss something, was there some war in the Middle East?”

Read More…