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Reuters UK- A near one year-old credit crunch still has plenty of venom and will sting global financial markets and the economy well into next year or even into 2010, a Reuters poll found.
On the eve of its one-year anniversary at the start of August the credit crisis is still spitting out victims and darkening the outlooks from global central banks.
Most of the 87 economists polled from across Europe, the U.S. and Canada said the worst was not over and most felt that the fallout would last for another six to 12 months at least.
The sudden rescue plan for U.S. mortgage finance agencies Freddie Mac and Fannie Mae arranged by the U.S. Treasury and the collapse of IndyMac bank last week has 34 economists forecasting the crisis will roll on for another year or even more.
The Australian- The SEC’s decision to take a hard line on the illegal practice of naked short-selling is a band-aid attempt to fix a problem that is plaguing most stock markets in various guises, but at least it is having a go.
The order lasts 30 days and covers 19 stocks, including the Wall Street jockeys Merrill Lynch, Lehman Brothers and troubled mortgage giants Fannie Mae and Freddie Mac.
In sharp contrast, the Australian Government has dragged its heels on short-selling abuses and isn’t expected to make any announcements until the second quarter of the year.
Meanwhile, stocks are being bludgeoned on the ASX as hedge funds borrow stocks from our super funds to attack companies. They are doing it with ease because there is little buyer support in the market, little transparency on covered short-selling, no capital gains tax and small fees charged on share lending.
Reuters- Some of the best known U.S. fund firms probably suffered significant losses in last week’s meltdown in the stocks of mortgage finance agencies Fannie Mae and Freddie Mac.
Among the casualties may be the one-time star stock-picker Bill Miller at Legg Mason, whose funds have owned a series of companies that have been battered by the credit crisis and the weakening economy.
Others include Capital Group, including its Growth Fund of America, which is the largest U.S. fund, AllianceBernstein, and Fidelity Investments.
FINalternatives- It’s not the first time “hedge fund” has been used as an epithet, but a former U.S. Treasury chief is using the H.F. words to describe mortgage giants Fannie Mae and Freddie Mac.
The two firms, into which Treasury said yesterday it will inject billions of dollars in loans and investments, have been “arbitraging their lower borrowing costs that came about because of the implied status as government entities,” John Snow, who now serves as chairman of private equity firm Cerberus Capital Management, told Bloomberg News.
“The business model they were using was really the model of a hedge fund,” he added.
West Palm Beach (HedgeCo.net)- The Hang Seng Index posted its biggest single-day loss in a month, as investors fretted about the recurring subprime credit crisis in the United States and its impact on regional banks and other financials.
"It’s a very bad day for financial markets across Asia. What’s happening to Fannie Mae and Freddie Mac is a clear indication of more troubles ahead in the mortgage market. What the U.S. Treasury is doing smacks of political desperation rather than genuine concern for the financial markets," said Benjamin Collett, head of hedge fund sales trading at Daiwa Securities SMBC Co. in Hong Kong.
The U.S. Treasury also announced plans to rescue Fannie Mae and Freddie Mac, further fuelling fears that the subprime crisis may have intensified.
"While Chinese banks are sound and have very little exposure to subprime, the market is trading very short term and the selloff in the financial sector is just an extension of the overall market moves." Collet said.
The Hang Seng Index lost 3.8 percent, closing at the lowest since March 20.
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Los Angeles Times- Wall Street regulators are examining whether securities firms adequately police rumor-mongering used to manipulate stocks after shares of Lehman Bros. Holdings Inc., Fannie Mae and Freddie Mac tumbled last week.
The Securities and Exchange Commission’s inspections unit; the Financial Industry Regulatory Authority, which monitors brokerages; and the New York Stock Exchange’s regulatory arm are checking whether firms have controls in place to prevent the intentional spread of misinformation, the SEC said Sunday. The agencies also will look at whether employees have been adequately trained.
"The examinations we are undertaking with FINRA and NYSE Regulation are aimed at ensuring that investors continue to get reliable, accurate information about public companies," SEC Chairman Christopher Cox said.
Regulators already are hunting for traders who may have sought to profit illegally from the credit crisis by falsely stoking panics about the stability of such companies as Bear Stearns Cos., which collapsed in March amid speculation that clients were pulling out their business.
Boston Globe- The Securities and Exchange Commission yesterday said that it and other regulators would begin examining rumor-spreading intended to manipulate securities prices.
The timing of the announcement, made before the markets opened in Asia, was meant to warn broker-dealers, hedge funds, and investment advisers to quell any spreading of rumors before trading started today.
The SEC has been engaged in an internal debate over what kind of investigation to mount with respect to rumors. The turbulence in the markets last week, with rumors adding to concerns about fundamentals affecting commercial banks, investment banks, and the government-chartered enterprises Fannie Mae and Freddie Mac, sped the decision to begin the examination and make it public.
"Traders know there is false information in the market. They need to think twice if they are going to pass it on," said Lori Richards, an SEC official.
New York (HedgeCo.Net) – Mortgage lenders Fannie Mae and Freddie Mac may get some help from the Fed in hopes of staving off a market implosion following a crippling credit crunch and a period of great stress in the financial markets.
"Fannie Mae and Freddie Mac play a central role in our housing finance system and must continue to do so in their current form as shareholder-owner companies," Treasury Secretary Hank Paulson said.
The Federal Reserve of New York has been authorized to provide funding should it prove necessary, in which case the loans will be dispersed with a 2.25 percent interest rate. Meanwhile, the U.S. Treasury is seeking to expand their credit line and make an equity investment if approved by Congress. The Treasury is currently allowed to extend $2.25 billion to each company.
"This affirmation of the important role [of both companies] – and that we should continue to operate as shareholder-owned companies – should go a long way toward reassuring world markets," said Freddie Mac head Richard Syron.
The two companies back about $5.3 trillion in mortgages, about half of the total mortgage debt in the U.S. Freddie Mac is scheduled to sell about $3 billion in short-term notes today.
Shares of Fannie Mae and Freddie Mac plummeted last week amidst investor scares, but saw a sharp rise before the bell today. Fannie shares rose 22 percent to $12.50 while Freddie shares climbed 27.1 percent to $9.85.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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