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Financial news I consider important, with my opinion, which is worth as much as you paid for it.
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Wednesday, October 8, 2008

Fed expands lending

The fed announced on Tuesday to expand lending to commercial paper writers (money markets) to help stabilize that sector.
What makes this particularly troublesome is the debt the fed will accept is UNSECURED. The argument can be made that for the fed, this debt isn't high risk, like high risk mortgages. However, the government is still taking risk that may end up making the taxpayer holding debt if the lender becomes insolvent.
In any event, this move is unprecedented, and yet another indicator of the market troubles. This action may help the market stabilize, allowing businesses to continue to operate. But the Fed may become creditors to insolvent corporations over the next 6 months.

In other news,
  • Citibank may shutter it's wholesale mortgage lending business.
  • President Bush "summons" world leaders on financial crisis.
    My Spin: WOW, talk about big brass ones. Under the Bush administration, corporations where allowed the "Funny" accounting to create this death spiral. Then the USA sold these "Assets" across the world, infecting them with our problems. Add to this after the unpopular Iraq war, and other unilateral moves, now Bush seeks help? We'll see how many friends the US still has willing to stick their financial neck out for a nation printing trillions of dollars and pouring it into a sinkhole of a financial system without fixing accounting valuations.
(image source)

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