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World Bank to protect poor from economic turmoil & AIG knew of potential problems in valuing swaps: report & Gov't eyes plan to take ownership stakes in banks
World Bank to protect poor from economic turmoil
By HARRY DUNPHY, Associated Press Writer
Sun Oct 12, 5:52 PM ET
The World Bank agreed Sunday to help developing countries strengthen their economies, bolster their financial systems and protect the poor against the financial turmoil in international markets.
Robert Zoellick, the bank's president, said the contagion affecting the global economy "has been a manmade catastrophe and responses to overcome it lie in all our hands."
He spoke as the U.S. moved to shore up Wall Street and financial institutions and the 15 countries that use the euro agreed in Paris to temporarily guarantee bank refinancing to ease the credit squeeze.
Speaking at a joint news conference with Zoellick, Dominique Strauss-Kahn, the head of the International Monetary Fund, endorsed the European move and said he expected markets to react favorably, "although you never can be sure what will happen."
Strauss-Kahn also called for quick implementation of the $700 billion U.S. rescue plan, which includes the government buying part-ownership in an array of banks.
Zoellick said that as the current crisis has unfolded, people in the United States and Europe reacted first with confusion, then anger, then fear.
"Those natural reactions will spread around the world as the impact spreads," Zoellick said. "We need to take them seriously."
He said any prolonged tightening of credit or a sustained global slowdown could cause serious setbacks to developing countries' efforts to improve the lives of their populations. Such countries are already struggling with high prices for energy and food.
"We need concerted global action now not just to deal with this crisis, but to put in place new architecture, new norms, and new oversight to ensure that this crisis never happens again," he said.
"The poorest and must vulnerable groups risk the most serious — and in some cases, permanent — damage," Zoellick said. "One hundred million people have already been driven into poverty this year and that number will grow."
Zoellick said the financial crisis underscored the need for "concerted global action now, not just to deal with the crisis but to put in place new architecture, new norms and new oversight to ensure that this crisis never happens again."
He said the bank and the IMF must ensure that as governments turn their attention to domestic matters, they do not step back from their commitment to provide billions in aid to poor countries.
"Aid flows must be maintained," Zoellick said. "Today's meeting of ministers was unanimous in that regard."
The head of the bank's policy-setting committee, Mexican Finance Minister Agustin Carstens, said ministers were unanimous in their view "that the World Bank had to protect the poor and vulnerable in the context of the global financial crisis." He said the Bank needs to be flexible to address the differing problems faced by poor countries and those with rapidly growing economies.
In remarks to the committee, Treasury Secretary Henry Paulson said global unity was needed, not isolationism and protectionism, which do not offer a way to contain the spreading damage. He expressed concern about the fallout on poor countries.
"Although we in the United States are taking many extraordinary measures to ease the crisis, we are not pursuing policies that would limit the flow of goods, services or capital, as such measures would only intensify the risks of a prolonged crisis," he said.
U.S. lawmakers, meanwhile, called for fast action — by the administration on a plan for the government to take direct stakes in certain banks, and by Congress on a new economic aid plan.
Sen. Chuck Schumer, chairman of the Joint Economic Committee, said an administration proposal to inject federal money directly into certain banks, in effect partially nationalizing the banking system, "is gaining steam."
"I am hopeful that tomorrow, the Treasury will announce that they're doing it. And they have to do it quickly ... markets are waiting," Schumer said.
Schumer and other Democratic leaders also backed plans by House Speaker Nancy Pelosi, D-Calif., for a session after the Nov. 4 election to consider a $150 billion proposal to boost the economy.
The measure would extend jobless benefits, provide more money for food stamps and finance public works projects, such as rebuilding bridges and roads.
"Yes, we are going to do a stimulus" after the election, said Rep. Barney Frank, chairman of the House Financial Services Committee. The idea is "give the middle class and the average citizen the same kind of relief that we try to give the financial sector," said Frank, D-Mass., who, like Schumer, appeared on the Sunday talk shows.
President Bush says his administration is doing everything possible to halt the biggest market disruption since the Great Depression of the 1930s.
_____
Associated Press writers Chris Rugaber and Tom Raum contributed to this report.
___
On the Net:
White House: http://www.whitehouse.gov/infocus/economy/
Treasury Department: http://www.ustreas.gov/
World Bank : http://www.worldbank.org/
International Monetary Fund: http://www.imf.org/
http://news.yahoo.com/nphotos/Director-Dominique-Strauss-Kahn-Rober...
World Bank Group President Robert B. Zoellick, center, listens as International Monetary Fund Managing Director...
AIG knew of potential problems in valuing swaps: report
http://news.yahoo.com/nphotos/American-International-Group-New-York...
File photo shows the logo of American International Group (AIG) at their offices in New...
AIG knew of potential problems in valuing swaps: report
Sun Oct 12, 2:32 PM ET
Top executives at American International Group Inc (AIG.N) knew of potential problems in valuing derivatives contracts, known as credit default swaps, long before questions about the risky transactions caused its stock to plummet, the Wall Street Journal said, citing documents released by congressional investigators.
The problems with these swaps would have driven AIG into bankruptcy -- if not for a $123 billion federal rescue, the Wall Street Journal said Sunday in a story on its website.
A federal criminal probe is investigating how candid AIG executives were with investors at a December 2007 investor conference and whether executives at AIG's financial-products unit, which sold derivatives contracts, misled AIG's outside auditor last fall, the Journal said.
At congressional hearings on Tuesday, a former internal AIG auditor wrote that he had expressed concerns early on about being excluded from conversations about the swaps valuation, the Journal said.
"The auditor, Joseph St. Denis, wrote in a letter to the House Committee on Oversight and Government Reform that in early September 2007, he learned that AIG's financial-products unit had been asked for billions of dollars in collateral related to derivatives it had sold," the newspaper said.
Credit-default swaps protect buyers against default risk on other investments. AIG believed the likelihood of making payouts was remote, the Journal said.
St. Denis wrote he wasn't personally involved in the AIG unit's swaps valuation. In late September 2007, according to St. Denis's letter, the AIG unit's head, Joseph Cassano, said he had "deliberately excluded" St. Denis "because I was concerned that you would pollute the process," the WSJ said. St. Denis said in his letter he resigned on October 1, 2007. AIG's chief auditor, Michael Roemer, asked him later that month why he quit. St. Denis said he told Roemer about Cassano's comment.
"That would indicate that a key AIG executive last fall was aware of Mr. St. Denis's concerns," the Journal said.
AIG declined to comment on the documents or make Roemer available for comment, the WSJ said. An AIG spokesman did not return Reuters' phone calls on Sunday.
(Reporting and writing by Ilaina Jonas; Editing by Jan Paschal)
Gov't eyes plan to take ownership stakes in banks
http://news.yahoo.com/nphotos/Economic-Bailout-Plan-Washington-Octo...
U.S. Treasury Secretary Henry Paulson speaks at a news conference after the G7 Ministerial meeting...
Gov't eyes plan to take ownership stakes in banks
By HARRY DUNPHY and TOM RAUM, Associated Press Writers
20 minutes ago
Treasury Secretary Henry Paulson told international leaders on Sunday that isolationism and protectionism could worsen the spreading financial crisis. With a new trading week dawning, U.S. lawmakers urged quick action by the Bush administration on measures to make direct purchases of bank stock to help unlock lending.
Sen. Chuck Schumer, chairman of the Joint Economic Committee, said an administration proposal to inject federal money directly into certain banks, in effect partially nationalizing the banking system, "is gaining steam."
"I am hopeful that tomorrow, the Treasury will announce that they're doing it. And they have to do it quickly ... markets are waiting," Schumer, D-N.Y., said.
The administration has not indicated when it would announce its next steps.
Democrats also are lining up behind House Speaker Nancy Pelosi's plan to bring lawmakers back to Capitol Hill after the Nov. 4 election to work on a second economic relief plan. The idea is "give the middle class and the average citizen the same kind of relief that we try to give the financial sector," said Democratic Rep. Barney Frank of Massachusetts, chairman of the House Financial Services Committee.
Top Democrats are suggesting a $150 billion measure that would extend jobless benefits, provide more money for food stamps and finance some construction projects, such as rebuilding bridges and roads. It would also include either a tax rebate or tax cut.
Rep. Roy Blunt of Missouri, the second-ranking House Republican, said he would help on a plan "that makes sense" but is not laden with huge public works projects or bailouts for states that overspent on social programs.
In another step aimed at easing the financial crisis, the Federal Reserve on Sunday approved the $12.2 billion acquisition of troubled Wachovia Corp. by Wells Fargo & Co. Wachovia is the latest in a string of major banks and financial institutions that have been felled by the financial crisis. The Fed action was expected.
As the International Monetary Fund and World Bank held their annual meetings over the weekend, Paulson warned the bank's policy-setting committee of the dangers of "inward-looking policies."
"Although we in the United States are taking many extraordinary measures to ease the crisis, we are not pursuing policies that would limit the flow of goods, services or capital, as such measures would only intensify the risks of a prolonged crisis," Paulson said.
Meanwhile, the World Bank pledged to protect poor and vulnerable countries and nations with rapidly developing economies. Mexican Finance Minister Agustin Carstens, who heads the bank's policy-setting committee, said the bank and the IMF will draw on the full range of their resources to help these countries.
Bank President Robert Zoellick told reporters the financial crisis "has been a manmade catastrophe. The actions and responses to overcome it lie in our hands."
Jittery investors awaited the reopening of stock markets — the Dow Jones industrial average just completed its worst week ever, plummeting more than 18 percent — and hoped for bold, coordinated international steps to address the crisis.
At a Paris meeting of European leaders Sunday, countries that use the euro agreed to temporarily guarantee bank refinancing to ease the credit crunch. French President Nicolas Sarkozy it would apply in 15 countries through the end of 2009 and was "not a gift to banks."
The United States has not yet gone that far. But President Bush met at the White House with top global financial leaders on Saturday in a display of unity and said afterward that they had agreed to general principles to combat the crisis. Bush, who had spoken about the crisis for 22 of the past 27 days, went biking at a state park in Maryland on Sunday morning and then kept to a private schedule the rest of the day.
Paulson has indicated the administration will use part of the recent $700 billion bailout Bush signed Oct. 3 to have the government take ownership stakes in banks. The plan has wide support on Capitol Hill, although Democrats pressed for quicker action in spelling out specifics.
Sen. Arlen Specter, R-Pa., sounded a cautionary note. "That has to be very, very carefully done," he said. "We are a capitalistic system and we don't want to move away with nationalizing the banking system. So that anything that's done has to be done on a temporary basis."
This plan and other Paulson moves were supported by three former treasury secretaries.
"This is bigger than the private sector can fix by itself," said James A. Baker III, who served under President Reagan. Robert Rubin, treasury secretary under President Clinton and now an adviser to Barack Obama, said it was important "to be highly, highly proactive."
Lawrence Summers, also a Clinton treasury secretary, said, "Any time you have a problem with trust, you've got to deal with it in a very aggressive way."
The lawmakers and ex-Cabinet officers made the rounds of the Sunday talk shows.
___
On the Net:
White House: http://www.whitehouse.gov/infocus/economy/
Treasury Department: http://www.ustreas.gov/
World Bank : http://www.worldbank.org/
International Monetary Fund: http://www.imf.org/
By HARRY DUNPHY, Associated Press Writer
Sun Oct 12, 5:52 PM ET
The World Bank agreed Sunday to help developing countries strengthen their economies, bolster their financial systems and protect the poor against the financial turmoil in international markets.
Robert Zoellick, the bank's president, said the contagion affecting the global economy "has been a manmade catastrophe and responses to overcome it lie in all our hands."
He spoke as the U.S. moved to shore up Wall Street and financial institutions and the 15 countries that use the euro agreed in Paris to temporarily guarantee bank refinancing to ease the credit squeeze.
Speaking at a joint news conference with Zoellick, Dominique Strauss-Kahn, the head of the International Monetary Fund, endorsed the European move and said he expected markets to react favorably, "although you never can be sure what will happen."
Strauss-Kahn also called for quick implementation of the $700 billion U.S. rescue plan, which includes the government buying part-ownership in an array of banks.
Zoellick said that as the current crisis has unfolded, people in the United States and Europe reacted first with confusion, then anger, then fear.
"Those natural reactions will spread around the world as the impact spreads," Zoellick said. "We need to take them seriously."
He said any prolonged tightening of credit or a sustained global slowdown could cause serious setbacks to developing countries' efforts to improve the lives of their populations. Such countries are already struggling with high prices for energy and food.
"We need concerted global action now not just to deal with this crisis, but to put in place new architecture, new norms, and new oversight to ensure that this crisis never happens again," he said.
"The poorest and must vulnerable groups risk the most serious — and in some cases, permanent — damage," Zoellick said. "One hundred million people have already been driven into poverty this year and that number will grow."
Zoellick said the financial crisis underscored the need for "concerted global action now, not just to deal with the crisis but to put in place new architecture, new norms and new oversight to ensure that this crisis never happens again."
He said the bank and the IMF must ensure that as governments turn their attention to domestic matters, they do not step back from their commitment to provide billions in aid to poor countries.
"Aid flows must be maintained," Zoellick said. "Today's meeting of ministers was unanimous in that regard."
The head of the bank's policy-setting committee, Mexican Finance Minister Agustin Carstens, said ministers were unanimous in their view "that the World Bank had to protect the poor and vulnerable in the context of the global financial crisis." He said the Bank needs to be flexible to address the differing problems faced by poor countries and those with rapidly growing economies.
In remarks to the committee, Treasury Secretary Henry Paulson said global unity was needed, not isolationism and protectionism, which do not offer a way to contain the spreading damage. He expressed concern about the fallout on poor countries.
"Although we in the United States are taking many extraordinary measures to ease the crisis, we are not pursuing policies that would limit the flow of goods, services or capital, as such measures would only intensify the risks of a prolonged crisis," he said.
U.S. lawmakers, meanwhile, called for fast action — by the administration on a plan for the government to take direct stakes in certain banks, and by Congress on a new economic aid plan.
Sen. Chuck Schumer, chairman of the Joint Economic Committee, said an administration proposal to inject federal money directly into certain banks, in effect partially nationalizing the banking system, "is gaining steam."
"I am hopeful that tomorrow, the Treasury will announce that they're doing it. And they have to do it quickly ... markets are waiting," Schumer said.
Schumer and other Democratic leaders also backed plans by House Speaker Nancy Pelosi, D-Calif., for a session after the Nov. 4 election to consider a $150 billion proposal to boost the economy.
The measure would extend jobless benefits, provide more money for food stamps and finance public works projects, such as rebuilding bridges and roads.
"Yes, we are going to do a stimulus" after the election, said Rep. Barney Frank, chairman of the House Financial Services Committee. The idea is "give the middle class and the average citizen the same kind of relief that we try to give the financial sector," said Frank, D-Mass., who, like Schumer, appeared on the Sunday talk shows.
President Bush says his administration is doing everything possible to halt the biggest market disruption since the Great Depression of the 1930s.
_____
Associated Press writers Chris Rugaber and Tom Raum contributed to this report.
___
On the Net:
White House: http://www.whitehouse.gov/infocus/economy/
Treasury Department: http://www.ustreas.gov/
World Bank : http://www.worldbank.org/
International Monetary Fund: http://www.imf.org/
http://news.yahoo.com/nphotos/Director-Dominique-Strauss-Kahn-Rober...
World Bank Group President Robert B. Zoellick, center, listens as International Monetary Fund Managing Director...
AIG knew of potential problems in valuing swaps: report
http://news.yahoo.com/nphotos/American-International-Group-New-York...
File photo shows the logo of American International Group (AIG) at their offices in New...
AIG knew of potential problems in valuing swaps: report
Sun Oct 12, 2:32 PM ET
Top executives at American International Group Inc (AIG.N) knew of potential problems in valuing derivatives contracts, known as credit default swaps, long before questions about the risky transactions caused its stock to plummet, the Wall Street Journal said, citing documents released by congressional investigators.
The problems with these swaps would have driven AIG into bankruptcy -- if not for a $123 billion federal rescue, the Wall Street Journal said Sunday in a story on its website.
A federal criminal probe is investigating how candid AIG executives were with investors at a December 2007 investor conference and whether executives at AIG's financial-products unit, which sold derivatives contracts, misled AIG's outside auditor last fall, the Journal said.
At congressional hearings on Tuesday, a former internal AIG auditor wrote that he had expressed concerns early on about being excluded from conversations about the swaps valuation, the Journal said.
"The auditor, Joseph St. Denis, wrote in a letter to the House Committee on Oversight and Government Reform that in early September 2007, he learned that AIG's financial-products unit had been asked for billions of dollars in collateral related to derivatives it had sold," the newspaper said.
Credit-default swaps protect buyers against default risk on other investments. AIG believed the likelihood of making payouts was remote, the Journal said.
St. Denis wrote he wasn't personally involved in the AIG unit's swaps valuation. In late September 2007, according to St. Denis's letter, the AIG unit's head, Joseph Cassano, said he had "deliberately excluded" St. Denis "because I was concerned that you would pollute the process," the WSJ said. St. Denis said in his letter he resigned on October 1, 2007. AIG's chief auditor, Michael Roemer, asked him later that month why he quit. St. Denis said he told Roemer about Cassano's comment.
"That would indicate that a key AIG executive last fall was aware of Mr. St. Denis's concerns," the Journal said.
AIG declined to comment on the documents or make Roemer available for comment, the WSJ said. An AIG spokesman did not return Reuters' phone calls on Sunday.
(Reporting and writing by Ilaina Jonas; Editing by Jan Paschal)
Gov't eyes plan to take ownership stakes in banks
http://news.yahoo.com/nphotos/Economic-Bailout-Plan-Washington-Octo...
U.S. Treasury Secretary Henry Paulson speaks at a news conference after the G7 Ministerial meeting...
Gov't eyes plan to take ownership stakes in banks
By HARRY DUNPHY and TOM RAUM, Associated Press Writers
20 minutes ago
Treasury Secretary Henry Paulson told international leaders on Sunday that isolationism and protectionism could worsen the spreading financial crisis. With a new trading week dawning, U.S. lawmakers urged quick action by the Bush administration on measures to make direct purchases of bank stock to help unlock lending.
Sen. Chuck Schumer, chairman of the Joint Economic Committee, said an administration proposal to inject federal money directly into certain banks, in effect partially nationalizing the banking system, "is gaining steam."
"I am hopeful that tomorrow, the Treasury will announce that they're doing it. And they have to do it quickly ... markets are waiting," Schumer, D-N.Y., said.
The administration has not indicated when it would announce its next steps.
Democrats also are lining up behind House Speaker Nancy Pelosi's plan to bring lawmakers back to Capitol Hill after the Nov. 4 election to work on a second economic relief plan. The idea is "give the middle class and the average citizen the same kind of relief that we try to give the financial sector," said Democratic Rep. Barney Frank of Massachusetts, chairman of the House Financial Services Committee.
Top Democrats are suggesting a $150 billion measure that would extend jobless benefits, provide more money for food stamps and finance some construction projects, such as rebuilding bridges and roads. It would also include either a tax rebate or tax cut.
Rep. Roy Blunt of Missouri, the second-ranking House Republican, said he would help on a plan "that makes sense" but is not laden with huge public works projects or bailouts for states that overspent on social programs.
In another step aimed at easing the financial crisis, the Federal Reserve on Sunday approved the $12.2 billion acquisition of troubled Wachovia Corp. by Wells Fargo & Co. Wachovia is the latest in a string of major banks and financial institutions that have been felled by the financial crisis. The Fed action was expected.
As the International Monetary Fund and World Bank held their annual meetings over the weekend, Paulson warned the bank's policy-setting committee of the dangers of "inward-looking policies."
"Although we in the United States are taking many extraordinary measures to ease the crisis, we are not pursuing policies that would limit the flow of goods, services or capital, as such measures would only intensify the risks of a prolonged crisis," Paulson said.
Meanwhile, the World Bank pledged to protect poor and vulnerable countries and nations with rapidly developing economies. Mexican Finance Minister Agustin Carstens, who heads the bank's policy-setting committee, said the bank and the IMF will draw on the full range of their resources to help these countries.
Bank President Robert Zoellick told reporters the financial crisis "has been a manmade catastrophe. The actions and responses to overcome it lie in our hands."
Jittery investors awaited the reopening of stock markets — the Dow Jones industrial average just completed its worst week ever, plummeting more than 18 percent — and hoped for bold, coordinated international steps to address the crisis.
At a Paris meeting of European leaders Sunday, countries that use the euro agreed to temporarily guarantee bank refinancing to ease the credit crunch. French President Nicolas Sarkozy it would apply in 15 countries through the end of 2009 and was "not a gift to banks."
The United States has not yet gone that far. But President Bush met at the White House with top global financial leaders on Saturday in a display of unity and said afterward that they had agreed to general principles to combat the crisis. Bush, who had spoken about the crisis for 22 of the past 27 days, went biking at a state park in Maryland on Sunday morning and then kept to a private schedule the rest of the day.
Paulson has indicated the administration will use part of the recent $700 billion bailout Bush signed Oct. 3 to have the government take ownership stakes in banks. The plan has wide support on Capitol Hill, although Democrats pressed for quicker action in spelling out specifics.
Sen. Arlen Specter, R-Pa., sounded a cautionary note. "That has to be very, very carefully done," he said. "We are a capitalistic system and we don't want to move away with nationalizing the banking system. So that anything that's done has to be done on a temporary basis."
This plan and other Paulson moves were supported by three former treasury secretaries.
"This is bigger than the private sector can fix by itself," said James A. Baker III, who served under President Reagan. Robert Rubin, treasury secretary under President Clinton and now an adviser to Barack Obama, said it was important "to be highly, highly proactive."
Lawrence Summers, also a Clinton treasury secretary, said, "Any time you have a problem with trust, you've got to deal with it in a very aggressive way."
The lawmakers and ex-Cabinet officers made the rounds of the Sunday talk shows.
___
On the Net:
White House: http://www.whitehouse.gov/infocus/economy/
Treasury Department: http://www.ustreas.gov/
World Bank : http://www.worldbank.org/
International Monetary Fund: http://www.imf.org/
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In the beginning of the "Zohar" the Article, the Rose,..it says: "Just as the rose among thorns is…
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