Tuesday, 30 September 2008

How Ferrari's U-Turn In Dubai

How Ferrari's U-Turn In Dubai - Watch more free videos

43,457,363 Reasons to Help Goldman Sachs

The embattled Goldman Sachs investment banking firm and its employees have spent more than $43 million dollars on lobbying and campaign contributions to cultivate friends and buy influence in Washington, D.C. since 1989, according to an ABC News analysis of campaign finance records compiled by the Center for Responsive Politics.

As a group, Goldman Sachs bankers have been the country's top political campaign contributors this year and have given $29.5 million in contributions since 1989, according to the Center.

"They are almost in a class by themselves," said Sheila Krumholz, the executive director for the Center for Responsive Politics.

"Their top executives are in a class that is way above the clout and name-dropping that most other American businesses can achieve," says Krumholz.

The firm has been badly shaken by the financial crisis, with management seeking emergency infusions of cash. The bailout legislation, proposed by Treasury Secretary Henry Paulson, reportedly led financier Warren Buffett to put $5 billion into Goldman Sachs because he felt the government would act to solve the financial crisis.

In a statement, Buffet expressed confidence in Goldman Sachs. "It has an unrivaled global franchise," he said, "a proven and deep management team and the intellectual and financial capital to continue its track record of outperformance."

Though he did tell the Wall Street Journal that if the government fails to act that his investment in Goldman would "get killed, and so will all our other investments."

Before becoming Treasury Secretary, Paulson was chairman of Goldman Sachs, earning over $140 million in compensation during his seven years as the firm's top officer, according to company filings. Upon taking office, Paulson divested himself of his 3.23 million Goldman shares, reportedly worth $485 million at the time, to comply with government ethics rules.

A spokesperson for the Treasury Department told ABC News that the department has a long history of bringing the expertise of Wall Street to the office of Secretary.

"The issues Treasury is working on right now involve financial institutions and the economy broadly. It's entirely appropriate for Secretary Paulson to engage in matters that impact the financial markets broadly," said the spokesperson.

Goldman Sachs bankers are also the number one contributors to the Barack Obama presidential campaign, giving $691,930 to his campaign in this cycle, according to the records.

John McCain's campaign has received substantially less from Goldman Sachs employees, $208,395, although they are, as a group, his fourth largest contributor.

In the 2008 election cycle, Goldman Sachs bankers have come up with $4.8 million in contributions to federal candidates, according to the records. 72 per cent of Goldman's money this year has gone to Democratic candidates and the national party, the majority party in Congress.

Employees of Goldman Sachs are listed as a top contributor to 55 separate members of Congress.

In addition to campaign contributions, Goldman Sachs has spent $13.8 million on lobbying expenses since 1998, when Paulson became co-CEO.

"I think they've found it's a small price to pay relative to the profits they could reap if they controlled how Washington affects their industry, and their company specifically," said Krumholz.

In addition to its connection to Paulson, Goldman Sachs has plenty of other former partners who have significant positions of power.

President Clinton's Treasury Secretary, Bob Rubin worked there for 26 years, rising to co-chairman.

New Jersey Governor John Corzine was at Goldman for 24 years, serving as CEO and chairman for five years before running for the US Senate.

The current White House chief of staff, Josh Bolton, is the former executive director of Legal and Government Affairs for Goldman Sachs International in London.

A spokesperson for Goldman Sachs said the firm doesn't have ready access about their employees' donations going back 20 years, but stated that "all Americans have the First Amendment right to participate in the public process, which includes campaign contributions."

The spokesperson said that Goldman's survival was no way tied to the proposed bailout, "Secretary Paulson's plan is pivotal to the nation and its economy."

Top selling product in USA and UAE

Do you know what is top selling product in USA and UAE?
In both cases you buy an investment product, ins't it?

When we are talking about USA investment product, this is CDS (credit default swap), US treasury bonds, dollar banknotes.

When we talk about UAE investment products, this is property. You can touch it, you can feel it.

Feel the difference...

Wall Street Killer - Credit default swaps

One 1994 trip by a group of JPMorgan bankers to the tony Boca Raton Resort & Club in Florida has become the stuff of Wall Street legend—though not for the raucous partying (although there was plenty of that, too). Holed up for most of the weekend in a conference room at the pink, Spanish-style resort, the JPMorgan bankers were trying to get their heads around a question as old as banking itself: how do you mitigate your risk when you loan money to someone? By the mid-'90s, JPMorgan's books were loaded with tens of billions of dollars in loans to corporations and foreign governments, and by federal law it had to keep huge amounts of capital in reserve in case any of them went bad. But what if JPMorgan could create a device that would protect it if those loans defaulted, and free up that capital?

What the bankers hit on was a sort of insurance policy: a third party would assume the risk of the debt going sour, and in exchange would receive regular payments from the bank, similar to insurance premiums. JPMorgan would then get to remove the risk from its books and free up the reserves. The scheme was called a "credit default swap," and it was a twist on something bankers had been doing for a while to hedge against fluctuations in interest rates and commodity prices. While the concept had been floating around the markets for a couple of years, JPMorgan was the first bank to make a big bet on credit default swaps. It built up a "swaps" desk in the mid-'90s and hired young math and science grads from schools like MIT and Cambridge to create a market for the complex instruments. Within a few years, the credit default swap (CDS) became the hot financial instrument, the safest way to parse out risk while maintaining a steady return. "I've known people who worked on the Manhattan Project," says Mark Brickell, who at the time was a 40-year-old managing director at JPMorgan. "And for those of us on that trip, there was the same kind of feeling of being present at the creation of something incredibly important."

630 B bailout instead of 700 B

The Federal Reserve will pump an additional $630 billion into the global financial system, flooding banks with cash to alleviate the worst banking crisis since the Great Depression.

The Fed increased its existing currency swaps with foreign central banks by $330 billion to $620 billion to make more dollars available worldwide. The Term Auction Facility, the Fed's emergency loan program, will expand by $300 billion to $450 billion. The European Central Bank, the Bank of England and the Bank of Japan are among the participating authorities.

What else can a $700 billion investment buy the American people?

A friend on a local list sent this in last night...

"Some cost comparisons:

Triborough (RFK) Bridge in 2008 dollars cost to build: $858 million.

The cost to build the Cross-Bronx Expressway in 2008 dollars: $1.08 billion. Until Boston's Big Dig, the Cross-Bronx Expressway the most expensive highway project ever per mile.

The Empire State Plaza $2.1 billion dollars (including interest).

The Big Dig in Boston: $14.6 billion dollars.

The total cost all projects built by Robert Moses in his 34-years in charge of Triboughbourgh Bridge Authority, NYC Parks Commissioner, City Planner, and NY Power Authority, as cited in the NYT Obituary of him: $60.1 billion in 2008 dollars.

The ENTIRE Interstate Highway program, including construction and repairs, has ONLY cost $500 billion over the past 51 years of it's existence."

Which got me wondering the same thing as you? Just How much is $700 billion? What could a $700 billion investment get us?

So how much does universal healthcare cost? What would $700 billion do for education? How many free college tuitions would that be? How much public education would it fund? i.e. what sort of impact would it have on local property tax payers? etc.

And as this is a tech blog and speaking of highways... just how much of an information superhighway could we build for $700 billion? Think we could close the gap with the rest of the world for $700 billion?

Think we could publicly finance campaigns for $700 billion so that the influence of filthy rich investers didn't have more say that us average A's and Z's? So that they didn't get to change the rules and break the financial, regulatory, environmental, legal, and governmental systems and leave us to pay for their mess in the first place?

What else can a $700 billion investment buy the American people?

How large is 700 B?

Big numbers are hard for people to process. 700 billion can start to sound like 300 billion, or 900 million for that matter. It becomes like sand grains or moon strands, magically big, past the point of counting; an amount you sit with a nephew and contemplate in wonder. Or, if you're rushing through the paper, "a whole lot." But since Congress is seriously considering giving 700 billion to be spent at the discretion of the Secretary of the Treasury, I thought I'd ask for some distributed help on describing this number to other people. Here's what I've come up with so far:

It is one third of the total amount of money received by the federal government in 2007, including social security, income tax, corporate tax, and all other receipts.

It is $140 billion more than has been spent on the Iraq war since the invasion.

It is $120 billion more than that spent on social security benefits.

It is almost 3 billion nonrefundable bus fares from Durham to San Francisco, leaving tomorrow.

It is nine times the amount spent on education in 2007.

It could pay for 2,000 McDonalds apple pies for every single American.

It is 35 times the amount spent on all foreign aid in most years.

It is more zeros than the calculator that comes with my computer allows.

It is 7,000 times bigger than the Sierra club’s yearly budget.

According to some estimates, it is three times what it would cost, over 10 years, to reduce oil dependency by 20%.

Its over twice the amount of all money given to all charitalbe organizations in the United States in any given year.

It is more than $100 for every person in the world.

700 Billion Bailout Failed - what is next?

So the question of the hour, what next???

I'll admit that I thought this was a horrible idea but at the same time I wonder if the government will open their eyes a little more and see if by forcing the "big dogs" to fail if that might actually help the economy. I personally think that a better solution would be for the government to help make smaller companies and corporations stronger so we could do away with the big dogs. What do others think would be a better solution?

Monday, 29 September 2008

Credit Default Swaps: The Next Crisis?

The CDS market exploded over the past decade to more than $45 trillion in mid-2007, according to the International Swaps and Derivatives Association. This is roughly twice the size of the U.S. stock market (which is valued at about $22 trillion and falling) and far exceeds the $7.1 trillion mortgage market and $4.4 trillion U.S. treasuries market, notes Harvey Miller, senior partner at Weil, Gotshal & Manges. "It could be another — I hate to use the expression — nail in the coffin," said Miller, when referring to how this troubled CDS market could impact the country's credit crisis.

Credit default swaps are insurance-like contracts that promise to cover losses on certain securities in the event of a default. They typically apply to municipal bonds, corporate debt and mortgage securities and are sold by banks, hedge funds and others. The buyer of the credit default insurance pays premiums over a period of time in return for peace of mind, knowing that losses will be covered if a default happens. It's supposed to work similarly to someone taking out home insurance to protect against losses from fire and theft.

Except that it doesn't. Banks and insurance companies are regulated; the credit swaps market is not. As a result, contracts can be traded — or swapped — from investor to investor without anyone overseeing the trades to ensure the buyer has the resources to cover the losses if the security defaults. The instruments can be bought and sold from both ends — the insured and the insurer.

All of this makes it tough for banks to value the insurance contracts and the securities on their books. And it comes at a time when banks are already reeling from write-downs on mortgage-related securities. "These are the same institutions that themselves have either directly or through subsidiaries invested in the subprime market," said Andrea Pincus, partner at Reed Smith LLP. "They're suffering losses all over the place," and now they face potentially more losses from the CDS market.

Indeed, commercial banks are among the most active in this market, with the top 25 banks holding more than $13 trillion in credit default swaps — where they acted as either the insured or insurer — at the end of the third quarter of 2007, according to the Comptroller of the Currency, a federal banking regulator. JP Morgan Chase, Citibank, Bank of America and Wachovia were ranked among the top four most active, it said.

Credit default swaps were seen as easy money for banks when they were first launched more than a decade ago. Reason? The economy was booming and corporate defaults were few back then, making the swaps a low-risk way to collect premiums and earn extra cash. The swaps focused primarily on municipal bonds and corporate debt in the 1990s, not on structured finance securities. Investors flocked to the swaps in the belief that big corporations would seldom go bust in such flourishing economic times.

The CDS market then expanded into structured finance, such as CDOs, that contained pools of mortgages. It also exploded into the secondary market, where speculative investors, hedge funds and others would buy and sell CDS instruments from the sidelines without having any direct relationship with the underlying investment. "They're betting on whether the investments will succeed or fail," said Pincus. "It's like betting on a sports event. The game is being played and you're not playing in the game, but people all over the country are betting on the outcome."

But as the economy soured and the subprime credit crunch began expanding into other credit areas over the past year, CDS investors became jittery. They wondered if the parties holding the CDS insurance after multiple trades would have the financial wherewithal to pay up in the event of mass defaults. "In the past six to eight months, there's been a deterioration in market liquidity and the ability to get willing buyers for structured finance securities," causing the values of the securities to fall, said Glenn Arden, a partner at Jones Day who heads up the firm's worldwide securitization practice and New York derivative.

The situation is already taking a toll on insurers, who have been forced to write down the value of their CDS portfolios. American International Group, the world's largest insurer, recently reported the biggest loss in the company's history largely due to an $11 billion writedown on its CDS holdings. Even Swiss Reinsurance Co., the industry's largest reinsurer, took CDS writedowns in the fourth quarter and warned of more to come in the first quarter of 2008.

Monoline bond insurance companies, such as MBIA and Ambac Financial Group Inc., have been hit the hardest as they scramble to raise capital to cover possible defaults and to stave off a downgrade from the ratings agencies. It was this group's foray out of its traditional municipal bonds and into mortgage-backed securities that caused the turmoil. A rating downgrade of the monoline companies could be devastating for banks and others who bought insurance protection from them to cover their corporate bond exposure.

The situation is exacerbated by the heavy trading volume of the instruments, the secrecy surrounding the trades, and — most importantly — the lack of regulation in this insurance contract business. "An original CDS can go through 15 or 20 trades," said Miller. "So when a default occurs, the so-called insured party or hedged party doesn't know who's responsible for making up the default and if that end player has the resources to cure the default."

Prakash Shimpi, managing principal at Towers Perrin, downplays this risk, noting that contractual law requires both parties to inform and get approval from the other before selling the CDS policy to someone else. "These transactions don't take place on a handshake," he said. Still, being unregulated, there is no standard contract, no standard capital requirements, and no standard way of valuating securities in these transactions. As a result, Pincus said she wouldn't be surprised to see a surge in litigation as defaults start happening. "There's a lot of outcry right now for more regulation and more transparency," said Pincus.

A meltdown in the CDS market has potentially even wider ramifications nationwide than the subprime crisis. If bond insurance disappears or becomes too costly, lenders will become even more cautious about making loans, and this could impact everyone from mortgage-seekers to municipalities that need money to fix roads and build schools. "We're seeing players in all of those spaces being more circumspect about whose credit they're going to guarantee and what exactly the credit obligation is," said Ellen Marshall, partner at Manatt, Phelps & Phillips LLP.

Shimpi admits a meltdown or even a slowdown in the CDS market would affect the amount and cost of liquidity in the market. However, he dismisses concerns that municipalities and others seeking capital could be left in the dust. "Even if the U.S. takes a hit, there are other markets in the world that have different dynamics, and capital flows are international," he said.

Still, most agree the potential repercussions are far-reaching. "It's the ripple effects, the domino effects" that are worrisome, said Pincus. "I think it's [going to be] one of the next shoes to fall" in the credit crisis. Miller said the subprime debacle, rising unemployment, record-high oil prices, and now CDS market troubles "have all the makings of the perfect storm.... There are some economists who say this could be another 1929 — but I don't believe it," he said. "We have a lot of safeguards built into the system that did not exist in 1929 and 1930." None of them, though, are directly targeted at CDS. On Wall Street, innovators are always ahead of regulators. And that can sometimes have a very steep price.

Credit default swaps

The buyer of a credit swap receives credit protection, whereas the seller of the swap guarantees the credit worthiness of the product. By doing this, the risk of default is transferred from the holder of the fixed income security to the seller of the swap.

A credit default swap resembles an insurance policy, as it can be used by a debt holder to hedge, or insure against a default under the debt instrument. However, because there is no requirement to actually hold any asset or suffer a loss, a credit default swap can also be used for speculative purposes and it is not generally considered insurance for regulatory purposes.

In one notorious case, a small hedge fund agreed to insure UBS AG (UBSN.VX: Quote, Profile, Research, Stock Buzz), the Swiss banking giant, from losses related to defaults on $1.3 billion of subprime mortgages for an annual premium of about $2 million.

The trouble was, the hedge fund set up a subsidiary to stand behind the guarantee -- and capitalized it with just $4.6 million. As long as the loans performed, the fund made a killing, raking in an annualized return of nearly 44 percent.

But in the summer of 2007, as home owners began to default, things got ugly. UBS demanded the hedge fund put up additional collateral. The fund balked. UBS sued.
The most luxurious offering at the $1.5 billion Atlantis bore the brunt of the blaze that hit the soon-to-open resort on Palm Jumeirah on Tuesday.

With its private elevator, the $25,000 a night Bridge Suite - located above the hotel lobby where the fire started - suffered extensive smoke damage, a source close to the project told Arabian Business.

The suite offers a generous reception lounge, dining area with a gold-leaf table seating 16 guests, and library with state-of-the-art media centre.

Lawmakers reject bailout as markets swoon

U.S. lawmakers rejected a $700 billion bailout plan for the financial industry in a shock vote that sent global markets sliding as the world credit crisis claimed more banks.

By a vote of 228-to-205 the House of Representatives rejected a compromise plan that would have allowed the Treasury Department to buy up toxic debt from struggling banks.

The plan's defeat sent U.S. stocks down sharply, with the Dow Jones industrial average briefly falling more than 700 points, its biggest intraday drop ever.

Sunday, 28 September 2008

Who is subprime borrower?

What Is a Sub-Prime Mortgage Lender?

March 22, 2004, Revised August 1, 2006, February 26, 2007

"I hear terrible things about subprime mortgage lenders. What are they and how can I avoid them?"
Subprime Lenders Defined

A sub-prime lender is one who lends to borrowers who do not qualify for loans from mainstream lenders. Some are independent, but increasingly they are affiliates of mainstream lenders operating under different names.

Sub-prime lenders seldom if ever identify themselves as such. The only clear giveaway is their prices, which are uniformly higher than those quoted by mainstream lenders. You do want to avoid them if you can qualify for mainstream financing, and I’ll indicate how shortly.

There are lenders who offer both prime and sub-prime loans, and one of them is referred to below. For borrowers who aren't sure where they stand, dealing with a lender who offers both has a distinct advantage. They will try to qualify you for prime and only if that fails will they drop you to subprime. Lenders who are strictly subprime might refer a prime borrower to an affiliated prime lender, but their financial interest dictates otherwise.
Subprime Borrowers Defined

A subprime borrower is one who cannot qualify for prime financing terms but can qualify for subprime financing terms. The failure to qualify for prime financing is due primarily to low credit scores. A very low score will disqualify. A middling score might or might not, depending mainly on the down payment, the ratio of total expense (including debt payments) to income, and ability to document income and assets.

Some other factors can also enter the equation, including purpose of loan and property type. For example, a borrower who is weak on some but not all of the factors indicated in the paragraph above might squeak by if purchasing a 1-family home as a primary residence. But the same borrower purchasing a 4-family home as an investment might not make it.

Evictions postpone fall in Dubai properties

Analysts have revised their predictions of a sharp drop in Dubai’s property market, saying a recent surge in property prices combined with a flood of people coming on to the rental market because of a villa eviction campaign will delay any price decrease.

“Demand will rise, and prices will follow as a result,” said Cecilia Rabess, a senior analyst at Investment Boutique.

According to a recent Morgan Stanley report, Dubai property prices were due for a correction of at least 10 per cent by 2010, following a nearly 79 per cent increase since the beginning of last year. As a property-related downturn spreads across the globe, analysts have doubted whether Dubai will buck the trend entirely.

However, last week’s eviction notices distributed by Dubai Municipality to families living in shared villas have led some to believe that a correction may be further off than previously thought.

Two months ago, a one-bedroom flat in the Dubai Marina area was renting for an average of Dh120,000 (US$32,600) a year, according to analysts. By the end of last week, it was nearly impossible to find one for less than Dh140,000. Over the past year, the sale price of villas in Dubai have skyrocketed by 76 per cent, while apartments have shot up 63 per cent, a survey by The National found last week.

Even Morgan Stanley, which first predicted the downturn, is now warning of a soft landing.

“The good news for Dubai is that you have underlying economic strength and, as a result, our base case reflects a soft landing for the emirate,” Sean Gardiner, head of MENA research at Morgan Stanley, said last week.

Andrew Gilmour, an economist with the Samba Financial Group, said the fundamentals of the Dubai property market remained strong. “The demand is there and, so long as they can access the credit, I don’t think you will see a particularly strong downturn too soon,” he said.

However, if demand remained strong and prices continued to rise, ”eventually it will become more a question of affordability,” said Ms Rabess. “Prices can only go up so much before people will no longer be able to afford to live in Dubai.”

Ms Rabess said the Government’s campaign could have been intended to encourage people to move into apartments in places such as International City and Discovery Gardens, which they may have previously avoided in favour of sharing a villa. Eventually, however, it could push people outside of the city.

“Unless the developers start building more affordable housing, people may start looking to places like Sharjah or Ajman for places to live,” she said.

The city began the villa eviction campaign in July, but declared a final 30-day deadline last week for all over-occupied villas in the city. Families in Jumeirah, Umm Suqeim, Al Rashidiya and Abu Hail were hit especially hard.

A spokesman for Dubai Municipality said last week: “No more notices would be issued to villas. Even those families who are sharing villas but have not received notices must move out within the deadline.” Once the deadline expires, violators will have their water and electricity supplies cut off, and landlords would face heavy fines – up to Dh50,000.”

The move comes at a time of increasing uncertainty in the Dubai property market, amid fears that foreign investors and the cash-strapped banks may cut off funding for local projects.

Cash scarcity could destabilise the market, analysts say, and possibly precipitate a fall in prices. Last Monday, the UAE central bank announced an emergency Dh50 billion lending facility meant to ensure banks have enough money to keep local infrastructure and property projects running.

In August, a Morgan Stanley report described Dubai the “bellwether of the whole GCC property market”, saying that a drop in prices there could extend to Abu Dhabi and all of the other major economies in the Middle East. However, barring such a fall, Morgan Stanley predicted that Abu Dhabi could see prices increase by 25 per cent before 2010. Qatar’s property market is expected to increase by 15 per cent during the same period.

“The Dubai real estate market is one of the real Achilles heels of the UAE economy,” said Giyas Gokkent, an economist at the National Bank of Abu Dhabi.

Dubai real estate market unlikely to crash: Nakheel Chief Executive

Real estate market of Dubai will not crash, however, a maturing market will draw the line between winners and losers, Nakheel's chief executive said.

Chris O'Donnell said: "Dubai has certainly entered the next phase of property development whereby the consumers can intelligently and confidently shift through the myriad of property offering. The word ‘correction' has been often misused in the property sector as a crash."

Prices of the real estate projects that offers zilch value will bite the dust, but quality developments in the right locations of Dubai will enjoy an excellent price appreciation, owing to more regulation, consumer protection and transparency, Nakheel's Chief Executive said, adding that the UAE emirate's property market's exogenous factors will help realty growth organically.

Friday, 26 September 2008

Foggy Dubai: View from the Tallest Structure on Earth [PIC]

Here is the view of Dubai from the Burj Dubai construction - the tallest point in the World

Thursday, 25 September 2008

What is 700 B bailout plan in simple language?

The context of bailout
Consider the spree of actions that have the potential—directly and indirectly—to cost taxpayers money: the government accepting $30 billion of Bear Stearns drecky collateral for a $29 billion loan to JPMorgan; giving investment banks access to the Fed's discount window; assuming responsibility for Fannie Mae and Freddie Mac, guaranteeing money-market funds (up to $50 billion); making a big loan to AIG (up to $85 billion); and now proposing the mother of all bailouts—up to $700 billion.

Who will pay for bailout?
So anybody who pops up on television, or in a congressional hearing, to talk about the vital necessity of this regrettable bailout, should be asked to give a sense of how much it might cost and then to come up with a way to pay for it. Two hundred billion dollars? Fine, please delineate $200 billion in spending cuts over the next two years or $200 billion in tax increases to pay to clean up your mess.

How often bailout is used?
Bailouts—the government's stepping in and providing financial assistance or credit guarantees to private-sector companies—are a highly confusing subject. As policymakers hasten to save some companies from the ravages of creative destruction, they leave others to fail. Some 5,644 businesses went bankrupt in July, up 80 percent from July 2007. So are there some objective criteria we can use to determine whether the government will toss a lifeline to a particular company?

Who is eligible for bailout?
It's a truism that the bigger you are, and the more you owe, the more forbearance you're likely to get. In 1984, when Continential Illinois, whose reckless lending practices had catapulted it into the ranks of the nation's 10 largest banks, ran into trouble, the government bought some of its loans and provided extraordinary compensation to depositors. "We have a new kind of bank," complained Fernand St. Germain, a congressman from Rhode Island, "It is called too big to fail." (St. Germain, who shepherded the bill that deregulated the savings-and-loan industry, would be blamed in part for the record-setting bailout of S&Ls later that decade).

Lobbyism and Bailout
Lehman Brothers gave much of their money to fund the Obama campaign - now we the taxpayers are asked to bail out Lehman Brothers. Also Fannie and Freddie gave much of their money to fund the Obama campaign - we are now seeing foreclosures at a record rate.

Are there any alternatives to bailout?
The government response to the housing mess took two main forms. The Federal Reserve slashed interest rates repeatedly, hoping to make life easier for borrowers and lenders. And under Paulson's direction, the Treasury Department put together the Hope Now coalition, an industry-led group that would modify mortgages before foreclosure. But by the time such efforts got started, too many dominoes had fallen.

Bush team, Congress haggle over $700 bn bailout

Strapped American homeowners could get government help renegotiating their mortgages as part of the $700 billion financial bailout legislation taking shape in Congress.

Congressional leaders and the Bush administration are haggling over details of the massive rescue plan, including Democrats' demand that executives at failing financial firms that receive the government's help can't get "golden parachutes" - referring to the large sums of money and other compensation they receive on their way out the door.

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, the architects of the bailout, were expected to face tough questions at a hearing Tuesday from lawmakers in both parties about the eye-popping cost, how the rescue would work and how taxpayers would be affected.

Paulson was in talks with Democrats about their proposal that the government be able to purchase equity in faltering companies as part of the plan, so taxpayers could benefit from future profits.

The administration is balking at another key Democratic demand: allowing judges to rewrite bankrupt homeowners' mortgages so they could avoid foreclosure.

Congressional aides said the House could act on a bill Wednesday or Thursday, with the Senate following soon thereafter.

"We have gotten closer," Rep. Barney Frank of Massachusetts, the House Financial Services Committee chairman, said late Monday.

"We're not there yet."

Still, lawmakers on both the right and left already were assailing the deal-in-progress.

Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee, blasted the emerging plan as "neither workable nor comprehensive."

"In my judgment, it would be foolish to waste massive sums of taxpayer funds testing an idea that has been hastily crafted and may actually cause the government to revert to an inadequate strategy of ad hoc bailouts," Shelby said.

Lawmakers on both extremes of the political spectrum assailed the plan as a massive, poorly conceived bailout. Conservative House Republicans and liberal House Democrats both huddled privately Monday to express their concerns, and they were drafting their own legislative alternatives.

The emergency legislation would give the government broad power to buy up devalued assets from troubled financial firms in a bid to unlock the flow of credit and stabilize badly shaken markets in the United States and around the globe.

In an expansion of its original proposal, the Bush administration is asking for broad power to buy up virtually any kind of bad asset - including credit card debt or car loans - from any financial institution in the U.S. or abroad in order to stabilize markets.

Frank said he and Paulson had agreed to create a congressional oversight board as part of the bailout and to require that the government come up with a plan to avoid foreclosures on any mortgages it acquires in the rescue. A government official with knowledge of the talks confirmed the administration backs those provisions.

There still were divisions on which tottering financial firms would be helped and what kind of assets the government could buy as part of the bailout.

Lawmakers in both parties appeared to be coalescing around the idea that executive compensation limits should be part of the bailout, although Paulson says he is concerned that such curbs would discourage companies from participating.

Investors were uncertain just how successful the administration's plan would be in unfreezing credit markets, which many businesses depend on to fund day-to-day operations, and for propping up the still-weak housing market.

On Monday, the Dow Jones industrials lost 372 points, wiping out the gains the index made Friday after administration officials and congressional leaders promised swift action to get bad debt off the books of banks and end the financial crisis.

Oil prices briefly spiked more than $25 a barrel before falling back to settle at $120.92, up $16.37, on the New York Mercantile Exchange. That shattered the previous record for a one-day jump in crude oil, $10.75.

Wednesday, 24 September 2008

8 things you should know about 700 bn bailout

1. Will this improve unemployment
No, US companies have cut more than 550,000 jobs this year, sending the unemployment rate up to a five-year high of 6.1 per cent in August. Those figures are likely to worsen in the coming months, with or without a bailout.

2. Would it prevent another Lehman-like bankruptcy?
Lehman Brothers failed last week because it couldn't find investors. Getting $700 billion in bad debts off banks' books will certainly help, but it remains to be seen whether that will be enough to convince investors that it is safe to put their money in financial firms.

3. Will this improve USA economy?
Even if the government gets Congressional approval this week to buy bad debts off banks' books, satisfying some of their cash needs, the financial sector will still need to raise money -- and investors haven't exactly been lining up to help. Unless banks can find funding somewhere, they won't be eager to resume lending, and that will leave the economy sputtering.

4. Is 700 bn enough to stop the financial crisis?
The good news is, outside of the financial sector, Corporate America is remarkably cash-rich with some $620 billion sitting on the books of large firms, so companies should be primed to spend once confidence is restored.

5. How does this affect me?
"Last week as the credit markets were frozen, the capital markets were frozen, we had a situation where American companies weren't able to borrow money," Paulson said on ABC's "This Week". "This could ultimately affect small banks, loans to businesses, loans to farmers, jobs, people's retirement."

6. What will happen to housing market?
The housing market is at the root of the year-long financial crisis, and some members of Congress -- expressing concern that Paulson was taking a roundabout route to helping homeowners -- are expected to push for more direct mortgage assistance when they hammer out terms of the bailout legislation this week.

7. How healthy are US banks?
"The US banking system needs a lot more capital," said Jan Hatzius, chief US economist at
Goldman Sachs. "Capital infusions are needed to avert a sharp contraction in lending."

8. What is this 700 bn bailout plan all about?
The government's bailout plan in effect addresses the first point by establishing a price for hard-to-value assets, and Congress may tackle the third issue this week. Raising more capital won't be easy.

The Subprime Solution: How Today's Global Financial Crisis Happened, and What to Do about It

With The Subprime Solution, Robert J. Shiller offers his formula to protect us from repeating such disasters: more financial engineering. It would be easy to sneer at this idea, but Mr. Shiller, an economics professor at Yale University, always deserves a hearing. . . . In what he describes as a 'brief manifesto,' Mr. Shiller argues that bailouts of distressed borrowers are inevitable to avoid wrecking our economy and shredding our social fabric--even though bailouts may punish the prudent (say, through higher taxes) while comforting those who gambled on real estate and lost.
(James R. Hagerty Wall Street Journal )

In The Subprime Solution, [Shiller] briskly sketches out his views on both short-term and long-term strategies for dealing with a housing meltdown that's left millions of Americans a lot less wealthy--and an unfortunate number at risk for losing their homes. . . . The book's most compelling discussion centers on the long-term opportunities that lie in this crisis. Shiller describes how key parts of America's financial system--the Federal Reserve, the Securities and Exchange Commission, and the FDIC, to name only three--were created in the reforms after earlier bank crises or the Great Depression. . . . Shiller suggests that political leaders should look at the current crisis as an opportunity to rethink the homebuying process and add new protections to keep homeowners from getting in over their heads during a future bubble.
(iel McGinn, Newsweek.com )

Yale University's Robert Shiller is one of the world's outstanding economic thinkers and intellectual innovators, with a record of foresight that is the envy of his profession. . . . His short, snappy and surprisingly far-reaching book on the subprime crisis is as interesting and indispensible as you would expect. . . . The Subprime Solution is an ambitious little volume. . . . It covers a remarkable amount of ground in less than 200 pages. . . . . [T]he book's broad framing of the issues is novel and valuable, and its arguments are always stimulating. . . . Shiller . . . is an ardent financial-technology optimist, and his book is a torrent of fascinating ideas. Anybody interested in the subject must profit from reading it.
(Clive Crook Financial Times )

Robert J. Shiller explains how trillions of dollars of mortgage debt, based on dubious loans to doubtful borrowers, were forfeited and how it can be fixed. An influential economist, he offers insights into the growth of the credit bubble and solutions for curing the ensuing chaos. . . . Shiller's reputation in economics, his majestic prose style, his statistical proofs and his vast coterie of admirers suggest that at least some of his recommendations will become part of U.S. mortgage regulation. . . . For those who want to figure out how to fix the global credit crisis that has developed as a result of Americans' inability or unwillingness to read their mortgage contracts, The Subprime Solution is vital reading. It is advocacy built on faith that government does good, that intervention never produces unintended results and that there is no other way to fix the mortgage mess.
(Andrew Allentuck The Globe & Mail )

In his new book, The Subprime Solution, the Yale University professor sounds an alarm that the credit crunch, now early in its second year, poses a dire risk. His text is a stimulating, rapid response to current events--and a forceful demand for dramatic action from Washington, where, he says, the White House and Congress have been 'totally inadequate' to the task. . . . [A] storehouse of valuable, provocative ideas awaits the reader of The Subprime Solution.
(Christopher Farrell BusinessWeek )

In The Subprime Solution, he argues that what united the missteps by the Federal Reserve, mortgage brokers, Wall Street bankers, and home buyers that together brought on the current financial mess was a shared belief that house prices never go down. What's the antidote to that kind of mass delusion? Shiller seems to have no interest in substituting his judgment, or the government's, for the market's. Instead, he sees information and innovation as the counter to group think.
(Justin Fox Time )

Robert J. Shiller's clear-eyed look at what happened in the U.S. housing market--and what might be done about it--is not keen to attribute blame to the actors in the drama. He explains that the development of subprime mortgages in the Nineties was welcomed as a way of extending home ownership to those once locked out of the market, and it was not the dishonesty of the mortgage lenders, or the greed of bankers, that led to the bubble. There was dishonesty and greed, but these were the result of the bubble, not its cause.
(Tim Worstall The Telegraph )

American optimism: Is there any investment bubble it can't fuel? Consider the excesses of the housing market, the effects of which are roiling the global economy. As Yale University economist Robert Shiller demonstrates in his short, whip-smart new book The Subprime Solution, there was a contagion at work that helped pushed home prices to unsustainable levels. . . . Shiller's views are grounded in exhaustive research and penetrating analysis. The Subprime Solution should be read by anyone with assets at risk in the global financial crisis and a desire to fix things ahead of the next crisis. Which is to say, all of us.
(Robert Elder Austin American-Statesman )

Robert Shiller's got an argument that will make some peoples' heads explode in his new book The Subprime Solution--we need more speculation in the housing market. . . . I said above that this solution will make some peoples' heads explode, that the solution to an excess of speculation is to create a market in yet more speculation. Yet in this case ti is indeed true, this is a valid solution.
(Tim Worstall The Register )

[The Subprime Solution] is short, punchy and political. Shiller is a top-flight academic economist who has often warned of the tendency of markets towards irrational exuberance, and of the harmful consequences that follow. He is rightly scathing towards the 'boosters' who kept assuring us that house prices only rise, and he gains authority for having spoken out during the boom, when it was an unpopular position to hold. . . . Shiller's debunking of house price myths is masterful. Especially important is his rubbishing of the concept of scarcity . . . Shiller's explanations are sophisticated and intelligent, and they are also admirably clear.
(Michael Savage Fund Strategy )

The Subprime Solution, his postmortem on irrational exuberance in the real estate market, is superb, even for general-interest readers otherwise confused by the whole mess. Though his introduction reads a bit like an arid position paper, his insistence on the fundamentally psychological, rather than economic, basis of the boom is supple and fascinating.
(Andrew Rosenblum New York Observer )

If you're unfamiliar with Robert Shiller then understand that he is perhaps the most eminent and considered examiner of modern investment bubbles. . . . Shiller's new book, The Subprime Solution, is a concise attempt to elaborate in just seven short chapters the genesis of the housing bubble, explode its myths, explore its scale and the dangers of its deepening impact, assert the need to maintain confidence in our economic and financial institutions by aggressive action, and then explore longer-term, more fundamental reforms and innovations that will create a population much more attuned to economic risk.... There are many more recommendations, but if this book has the ambition of Keynes' earlier work, and the scale of the problem is as suggested, I'd argue that the book is as accessible as you are going to get from such a modern behavioural economics guru. It's a book that everyone who lives in a house should own; just don't buy ten and try to rent them out to friends.
(The Knackered Hack )

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Buying A Home In Dubai & The Middle East: A Survival Handbook (Buying a Home)

Buying a Home in Dubai & the UAE covers everything a prospective buyer could wish to know, including buying for investment, the best places to live, finding your dream home, finance, the purchase procedure, moving house, taxation, insurance, letting and much, much more.

It is packed with vital information and insider tips to help readers avoid disasters that can turn their dream home into a nightmare.

Buying a Home in Dubai & the UAE is essential reading for anyone planning to buy a home in the United Arab Emirates, and is designed to guide readers through the property maze and save them time, trouble and money! Printed in full color.

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Friday, 5 September 2008

Skygardens Luxury Residential Project in Dubai Completed

Dubai, UAE - Amlak Finance PJSC, the largest real estate financier in the Middle East, today opened the doors of Skygardens for an exclusive viewing by the media. Skygardens is the first ready to move-in high-rise residential tower located at the heart of Dubai International Financial Centre (DIFC). This spacious architectural masterpiece has been completely designed by Fendi Casa, the world renowned house of style, and the apartments will bear its double-F insignia.

Speaking during the media tour Mr. Arif Alharmi, Chief Executive Officer, Amlak Finance PJSC, said, “This is a unique address brought by Amlak to all our customers, a one of its kind ready to move in development to be completely designed by Fendi Casa. The tower consists of spacious contemporary apartments of different sizes to suit individual requirements, intertwined with exquisite gardens and plenty of open spaces.”

The residences, ranging from a studio, one, two bedrooms, duplexes and penthouses have spectacular views of Emirates Towers, The Gate and Burj Dubai. There are a total of around 500 units with five typical floor layouts. Adding to this there are five exquisite gardens, each with their own distinct character, lighting, and design.

Alharmi added, “We will soon be retailing the units in the UAE as well as international financial centers that are of strategic importance to DIFC such as London, Singapore, Hong Kong, Tokyo and Germany. We will offer competitive financing packages to our customers who are interested to invest in Skygardens”

The deluxe 39-floor tower, developed by Mazaya Real Estate, is the first residential building to anchor the DIFC and includes extensive landscaping with park-like environment as well as unparalleled luxury lifestyle. Skygardens is located south of the Gate and Emirates Towers, our most prestigious neighbors and moments drive from Sheikh Zayed Road and Emirates road connecting Dubai with all other emirates.

Arjan by Mizin

Arjan has been launched in response to the growing investor demand for mixed use property developments. The 11 million sq ft project, to be located on Emirates Road opposite Dubai Autodrome in Barsha, will comprise a balanced layout of commercial, residential, retail and hospitality developments in 10 demarcated zones with 157 plots.

Adding to Arjan's distinctive tourist dimension will be the Great Dubai Wheel - a 185m observation wheel with 18 technologically advanced capsules and a seating capacity of 40 persons, providing panoramic views of the city's skyline for durations of 36 minutes per cycle.

Lincoln Park - Arjan - Dubai Land

Lincoln Park is a fantastic low-rise architectural masterpiece in the heart of Arjan, at Dubai Land. This Dubai property is a mixed use development of 7 buildings split into dedicated commercial (office and retail) and residential areas, and has been stylishly designed in Chicago-style architecture. Its magnificent location and excellent facilities make Lincoln Park a perfect place to work and live at the heart of Dubai.

British top UAE's real estate investors list

AC Nielsen report revealed that British migrants invest the most in Dubai's real estate sector. They invest to find appropriate opportunities in the UAE, especially in Dubai and eye property related deals.

AC Nielsen surveyed and collected data covering UAE citizens, Arab migrants, Asian migrants and those from Western regions to review the type of investment opportunities. According to the report 50 per cent planned to invest in the UAE. On the other hand, Westerners had invested the most in the UAE.

Mohammad Al Hashimi, executive chairman of Zabeel Investments, the one that commissions AC Nielsen report said, 'The results of the research are very interesting, especially those planning to stay in the UAE for a number of years.

Also, it is very clear from the migrants' hesitation that there is a serious need for clarification into the ownership and liability laws with regards to property.

Iconic tower Emaar Burj Dubai attains record heights

The iconic tower developed by Emaar, Burj Dubai, has attained record height of 688 meters.

The tower, which is already the world's tallest, after surpassing KVLY-TV mast of USA, North Dakota, in April 2008, now includes 160 storeys, which is also the largest number of storeys than in any building.

On completion, Burj Dubai, will meet all four criteria listed by the council on tall buildings and urban habitat (CTBUH), which classifies the world's tallest structures. The CTBUH takes into consideration the height of buildings upto the structural top, the highest occupied floor, the top of the roof, and the tip of pinnacle, antenna, spire, mast or flag pole.

Designed by the Skidmore, Owings & Merril (SOM), Burj Dubai is constructed by Samsung Corporation of South Korea. The project and construction is managed by Turner Construction International. About 7500 professionals and skilled workers are employed on-site at Burj Dubai.
The cladding work is nearing completion, and the work has begun on the interiors, which boasts superior finishes. Only the best efficient technologies are being deployed to ensure that the iconic building remains as a standard for energy usage and water recycling.

Burj Dubai is the anchor mega-project by Emaar at the Dh.73bn Downtown Burj Dubai. Being described as the new heart of the city, the Downtown Burj Dubai is a mixed-used development comprising premium hotels, modern residences, exclusive business facilities, and shopping malls and leisure amenities.