Wall Street plunges on financial mess, dollar falls, due to $15 billion Merrill Lynch loss reporting

Wall Street plunges on financial mess

www.chinaview.cn 2008-01-12 06:15:33 Print

·Merrill Lynch is expected to report losses of $15 billion due to soured mortgage investments. ·The Dow Jones average fell 246.69, or 1.92 percent, to 12,606.30 . ·The Standard & Poor's 500 index fell 19.31, or 1.36 percent, to 1,401.02.

NEW YORK, Jan. 11 (Xinhua) --

Wall Street plunged again on Friday amid renewed concerns on U.S. economic recession due to financial mess.

Merrill Lynch is expected to report losses of 15 billion U.S. dollars stemming from soured mortgage investments, which forced the nation's largest brokerage to be seeking another capital infusion to help shore up its balance sheet.

Investors were also nervous after American Express, following Capital One's footsteps, warned it will have to take a charge of 440 million dollars before tax in the fourth quarter to cover higher delinquencies and loan write-offs.

The Dow Jones average fell 246.69, or 1.92 percent, to 12,606.30 after falling more than 300 points in the last hour.

The Standard & Poor's 500 index fell 19.31, or 1.36 percent, to 1,401.02, and the Nasdaq composite index fell 48.58, or 1.95 percent, to 2,439.94.

Dollar falls on U.S. rate cut talk

www.chinaview.cn 2008-01-11 09:08:41 Print

NEW YORK, Jan. 10 (Xinhua) --

The dollar fell against most major currencies as U.S. Federal Reserve Chairman Ben Bernanke said the central bank was ready to take aggressive measures to support the U.S. economy.

"We stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks," Bernanke said in a speech to a housing and finance group.

Wall Street interpreted Bernanke's comments to mean that there is now an increased likelihood the Fed will lower its key federal funds rate by a half percentage point, to 3.75 percent, at the conclusion of its two-day meeting on Jan. 30.

The Fed may cut rates up to 1 percent if there are more reports of weak U.S. economic data in the next two weeks, analysts said.

The euro and pound were bolstered as the European Central Bank (ECB) and the Bank of England decided to keep key rates unchanged on Thursday. Investors speculated that the ECB may raise rates later this year to combat the inflation in the euro zone.

The euro rose to 1.4793 dollars in late New York trading, while on Wednesday it was worth 1.4663 dollars. The British pound rose to 1.9609 dollars from 1.9572 dollars.

The dollar rose to 109.54 Japanese yen from 109.47 yen. It fell to 1.1045 Swiss francs from 1.1144 Wednesday, and fell to 1.0108 Canadian dollars from 1.0111.

Editor: Sun Yunlong

Swiss regulator warns U.S. subprime crisis not over

www.chinaview.cn 2007-12-18 05:56:51 Print

GENEVA, Dec. 17 (Xinhua) --

A Swiss banking regulator has warned that the United States subprime crisis is not over and could spread to other credit markets, the Swissinfo website reported on Monday.

"The subprime crisis could spread to other credit markets, such as in the fields of credit cards, consumer credit, car financing, student loans or commercial credit," said Daniel Zuberbuhler, head of the Swiss Federal Banking Commission.

In an interview with local media, Zuberbuhler said that the danger to financial institutions was far from over.

He said nobody could make predictions about developments in complicated credit markets with certainty, so "it is important that banks have a strong capital base."

Zuberbuhler also sits on the Basel Committee on Banking Supervision, which sets standards for internationally active banks and advises on how much capital they should set aside against risks.

His warning came a week after Switzerland's largest bank, UBS, announced a further 10 billion-U.S.-dollar write down due to the ongoing deterioration of the U.S. mortgage market.

UBS also announced a massive injection of funds from Singapore and the Middle East.

The bank said it was responding to the "continued deterioration in the U.S. subprime mortgage securities market" but also taking into account worsening expectations of future developments.

The write down followed a 3.7 billion -U.S.-dollar hit UBS suffered at the end of October that was also related to U.S. subprime mortgages.

Editor: Yan Liang

Merrill Lynch to raise investment to cover subprime loses

www.chinaview.cn 2007-12-25 11:03:46 Print

CHICAGO, Dec. 24 (Xinhua) --

Merrill Lynch has enhanced its capital position by reaching agreements with two investors to raise up to 6.2 billion U.S. dollars of newly issued common stock in a private placement, announced the company on its website on Monday.

  The agreements, with Temasek Holdings and Davis Selected Advisors, were the latest success of Merrill Lynch's efforts to raise capital to cover its huge losses suffered in the U.S. subprime mortgage crisis.

According to the agreements, Temasek Holdings will invest 4.4 billion dollars in Merrill Lynch common stock and has the option to purchase an additional 600-million-dollar of Merrill Lynch common stock by March 28, 2008.

Davis Selected Advisors will make a long-term investment of 1.2 billion dollars in common equity.

These transactions are expected to close by mid-January, said Merrill Lynch, one of the Wall Street's biggest investment banks.

"The benefits of these transactions are not limited to strengthening our financial position (as) we also see significant benefits from partnering with Temasek Holdings given its sizable investment across Asia, particularly in Singapore, China and India," said John A. Thain, chairman and CEO of Merrill Lynch.

Calling Temasek Holdings and Davis Selected Advisors "savvy investors with proven track records of achieving strong investment returns," Thain hoped the investment will enhance his company's ability to "drive new growth opportunities around the world."

Temasek Holdings is an Asia investment house headquartered in Singapore. And Davis Selected Advisors is an independent investment advisor which currently manages equity assets of more than 100 billion dollars through a number of funds.

Editor: Du Guodong

U.S. economy jolted by subprime troubles

www.chinaview.cn 2007-12-06 13:28:30 Print

By Hu Fang

WASHINGTON, Dec. 6 (Xinhua) --

The U.S. economy this year was jolted by a "quake", with its epicenter at the high-risk subprime mortgage market and its aftermath expected to linger well into next year.

The "quake" hit the U.S. stock markets in early August and has since thrown those across the world into a violent tremor. The market turbulence now seemed gone after the Federal Reserve and other central banks injected billions of dollars into financial systems and cut interest rates.

Investors' worries and fears, however, persist because troubles in the subprime market, which offers loans to people with lower credit and income, are still there.

Subprime Troubles

Troubles in the subprime market had their roots when the U.S. housing sector was experiencing a heady five-year boom until last year.

Spurred by this seemingly never-ending housing boom, mortgage lenders became less cautious, loosening credit standards and offering loans to more and more subprime borrowers who otherwise would never have afforded to buy a home.

To attract more home buyers, lender also came up with new mortgage products. Many subprime borrowers got loans that allowed them to make no down payment or to pay initial interest only.

Many others took out adjustable-rate mortgages, which offered very low initial "teaser" interest rates that jumped much higher over the life of the loan.

It turned out that both lenders and borrowers overlooked the risks hidden behind those loans.

If the housing boom could sustain, just as subprime borrowers and lenders had wished, home buyers with lower credit and income would be able to refinance their homes or simply sell them when they had difficulties keeping up with their payments.

Unfortunately, the once-sizzling housing market cooled down last year and slipped into the worst slump in the past two decades. Sales plunged and so did home prices. Interest rates, by contrast, were rising.

Homeowners, especially those overstretched borrowers at the subprime market, were having troubles to pay their mortgage as higher rates kick in. As home prices slide and lenders tighten credit standards, homeowners can hardly refinance or even sell their homes.

Steep penalties for prepaying home loans have made things even harder for homeowners. Inevitably, defaults are rising rapidly and foreclosures have climbed to record highs.

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