Since the recent dramatic events in the financial world around the globe, the organisers of this weeks' Worldwide Property Show being held in Dubai have just announced the results of a recent survey on investor confidence conducted in association with YouGovSiraj.
The survey shows an optimistic view, with one fourth of respondents feeling that the global crisis will only have a minor impact on the local UAE Property Market. 56% surveyed felt that there may be a slowdown but will not have the same impact as in Europe and US.
The survey further revealed that Dubai residents are more confident than those living in Abu Dhabi and Sharjah however 40% of all respondents felt that now is still a good time to invest as they can pick up a bargain. 16% of respondents were not sure and were sitting on the fence.
When deciding on the developer -value for money, ability to adhere to promises and transparency of information are the attributes that people look at. The least important attribute is public information available either on a website or in the media. This indicates that consumers are anxious about cost of ownership and the inherent investment value of the property.
Respondents were also asked what were their top destinations for real estate investment around the world - 55% favoured Asia, 40% for Middle East, 32% for Europe & UK and 27% for North America.
George Betz ,International Sales Director at Dubai Shows Limited organisers of the Worldwide Property Show said: "Considering our survey has literally been completed in the last few days since the global meltdown, it is very encouraging to see that people still understand the merit in investing in real estate and that now is still a good time to buy as prices are low."
Betz continued: "The Worldwide Property Show which started in 1995 has received a record number of developers and estate agents wishing to participate in this season's show and will feature 85 exhibitors from 32 countries including USA, Egypt, Morocco and UK, as well as emerging Asian markets such as Philippines and Thailand and a very wide variety of UAE developers and agents."
Mike Bridge, Business Development Director at Dubai Shows Limited said: "With developers feeling the pinch, it is definitely a buyers market with great opportunities to select prime property in some of the best locations in the world. You cannot take away the benefits, even in a crisis, of a fabulous city or beautiful coastline."
Bridge added: "It is also good news that the banks have recently received Governments' support and are more likely to be in a position to fund property investment again".
The Worldwide Property Show and UAE Developer, the UAE's longest running consumer property exhibition opens 23rd to 25th October 2008 at the Grand Hyatt Dubai.
Original at:
link
Monday, 20 October 2008
Thursday, 16 October 2008
Cityscape, World's biggest real estate investment expo opens in Dubai as growth slows
Cityscape Dubai, the largest business-to-business real estate investment and development event in the world, opened today amid news that Dubai house price growth slowed to 16% in the second quarter of this year.
In an earlier version of this story, Property Wire incorrectly cited a report by Colliers stating that Dubai property prices fell by 16%. Colliers actually said that the house price growth had slowed down to 16% in the second quarter. Property Wire regrets the errors and the story has been amended to reflect the accurate figures.
The figures were met with an intake of breath as they had been rising sharply and although analysts have been predicting a slowdown few expected such a drop at this time.
The figures, from leading international property consultants Colliers, indicate that Dubai's six year property boom is at an end with the company predicting figures will remain flat for at least 12 months, probably until 2010.
'In the first quarter, the average price went up by 43% while in the second quarter they (slowed to) 16%,' said Ian Albert, a regional director at Colliers International. He attributed the drop to seasonal trends and a possible inkling among investors of the looming credit crunch.
Colliers said the main threat to house prices was liquidity in the financial system. A shortage of cash has already doubled the interest rate that banks charge each other in the last four months to more than 4%. Many home finance companies have restricted the amount of money they lend to 65 or 75% of the property's value, and home finance rates have risen to about 8%.
'Future performance will be hinged on liquidity. Everyone in Dubai is now looking for the magic figure on how much prices will fall, but because of what's going on in the US and Europe, we won't know where we are in terms of liquidity for at least another two to three months. Prices have so far mainly appreciated through speculation,' added Albert.
He concluded that although mortgages will be harder to come by, demand would remain strong, with the market moving away from off-plan speculation and back to basic fundamentals, such as providing a good quality product.
The news should be taken as a wake up call but should also be seen as an opportunity to look at other markets. 'Now, as the world faces up to market uncertainty, we enter a new era in which Middle East developers are expected to maintain and even increase their presence throughout the world,' said Rohan Marwaha, managing director of Cityscape.
'The sheer scale and intensity of the iconic projects in one of the most impressive property booms in modern history has kept the UAE, and Dubai in particular, in the headlines worldwide for the best part of a decade,' he added.
Dubai's largest developer, Nakheel, defied the pessimistic news by launching the world's tallest tower. Nakheel, part of the Dubai World group, unveiled plans to build a tower that will be more than one kilometre high - eclipsing the current tallest tower in the world, Burj Dubai.
Nakheel declined to disclose the project's costs, but said it was confident of weathering the financial storm, particularly as the project would be phased over 10 years. 'We know that the world is experiencing a financial crisis right now. But this is jut part of a normal economic cycle,' said Nakheel's chief executive Chris O'Donnell.
'It will have an impact on the Middle East but our view is that it will be relatively small as the fundamentals in this market make it stand out compared to other markets. There might be a slowdown but there definitely won't be a crash. We are confident that over 10 years we will be able to finance, build and develop this project,' he added.
In an earlier version of this story, Property Wire incorrectly cited a report by Colliers stating that Dubai property prices fell by 16%. Colliers actually said that the house price growth had slowed down to 16% in the second quarter. Property Wire regrets the errors and the story has been amended to reflect the accurate figures.
The figures were met with an intake of breath as they had been rising sharply and although analysts have been predicting a slowdown few expected such a drop at this time.
The figures, from leading international property consultants Colliers, indicate that Dubai's six year property boom is at an end with the company predicting figures will remain flat for at least 12 months, probably until 2010.
'In the first quarter, the average price went up by 43% while in the second quarter they (slowed to) 16%,' said Ian Albert, a regional director at Colliers International. He attributed the drop to seasonal trends and a possible inkling among investors of the looming credit crunch.
Colliers said the main threat to house prices was liquidity in the financial system. A shortage of cash has already doubled the interest rate that banks charge each other in the last four months to more than 4%. Many home finance companies have restricted the amount of money they lend to 65 or 75% of the property's value, and home finance rates have risen to about 8%.
'Future performance will be hinged on liquidity. Everyone in Dubai is now looking for the magic figure on how much prices will fall, but because of what's going on in the US and Europe, we won't know where we are in terms of liquidity for at least another two to three months. Prices have so far mainly appreciated through speculation,' added Albert.
He concluded that although mortgages will be harder to come by, demand would remain strong, with the market moving away from off-plan speculation and back to basic fundamentals, such as providing a good quality product.
The news should be taken as a wake up call but should also be seen as an opportunity to look at other markets. 'Now, as the world faces up to market uncertainty, we enter a new era in which Middle East developers are expected to maintain and even increase their presence throughout the world,' said Rohan Marwaha, managing director of Cityscape.
'The sheer scale and intensity of the iconic projects in one of the most impressive property booms in modern history has kept the UAE, and Dubai in particular, in the headlines worldwide for the best part of a decade,' he added.
Dubai's largest developer, Nakheel, defied the pessimistic news by launching the world's tallest tower. Nakheel, part of the Dubai World group, unveiled plans to build a tower that will be more than one kilometre high - eclipsing the current tallest tower in the world, Burj Dubai.
Nakheel declined to disclose the project's costs, but said it was confident of weathering the financial storm, particularly as the project would be phased over 10 years. 'We know that the world is experiencing a financial crisis right now. But this is jut part of a normal economic cycle,' said Nakheel's chief executive Chris O'Donnell.
'It will have an impact on the Middle East but our view is that it will be relatively small as the fundamentals in this market make it stand out compared to other markets. There might be a slowdown but there definitely won't be a crash. We are confident that over 10 years we will be able to finance, build and develop this project,' he added.
Wednesday, 8 October 2008
81st Edition of the Carnival of Real Estate
Christopher Smith at Real Estate Investing in the Real World writes the beginning of an article about investing in real estate long-term. I really enjoyed the article until it suddenly ended. It should have been a completed article. The beginning paragraphs were intriguing and well written. Too bad it was cut short.
DaltonsBriefs presents a post that references a Zillow post about activists doing damage to property to bring notice to their cause.
MyNewPlace discusses the Casulo, a bedroom set in a box. It’s not available yet, but might be a great idea for students or people traveling abroad.
Nathan Blair of Salt Lake City Utah Real Estate Blog thinks aloud about what is ”classic” in architecture.
International Listings presents an incomplete, and questionable (they forgot to mention the best real estate website) list of real estate websites that are 2.0.
Purva Brown, the Sacremento Real Estate Gal, brings up three mistakes first-time home buyers fall victim to.
Silveral of Celebrity News and Gossip talks about celebrity homes and the characteristics many of them share.
John Lockwood of Sacramento Real Estate Blog lists the “Seven Deadly Misktakes Buyers Make in This Market.”
Dee Copeland of Texas Realty Blog writes about the trend of “Boomerang Buyers” moving back to the Austin area.
Charles Woodall of Dotham Home Search suggests that “Days on Market are Irrelevant” and makes some good points. I have posted on this topic myself and think it’s a good topic of discussion with buyers, especially in areas that are in buyers market’s.
Dan Melson at Searchlight Crusade suggests that “The Mortgage Loan Market Controls the Real Estate Market.” His thinking is that as loan products go away, so do buyers who need those products to buy, and when rates go up, the buyer pool of a price range gets smaller.
Lenore Wilkas of Hillsburough, Burlingame Luxury Home Sales says “Be Sure to Ask Your Agent How Long the House Has Been For Sale.” The post discusses the practice of re-listing property to manipulate the days-on-market for the listing.
Raymond at Money BlueBook gives his reviews of the house-flipping shows currently on television.
Joe also gives us a look at some of the Tallahassee market’s pricing and sales trends.
Silicon Valley Blogger at The Digerati Life asks “Who’s To Blame For The Subprime Mortgage Mess?” With responsibility distributed between many people involved in the real estate transaction, he wraps up with some good advice to the buyers who, I believe, are ultimately responsible for signing contracts on homes they can’t afford.
Steve Leung gives us the “Consumer’s Rights When Purchasing New Homes”. He talks about warranties, having your own representation and protecting yourself.
Steve Faber at DebtBlog wonders, “Property Foreclosures- Is It Really as Bad as They Say?” Steve goes over some of the statistics showing some states, including Nevada, Florida and California have high foreclosure rates, but also had some of the highest run-up’s in prices over the last few years.
Cynthis Holt from Real Life Real Estate shares her frustrations with buying a short sale property in “War Zone”.
Kathy Koops from The Cincy Blog explains how the “3 Key Words in Real Estate” may not be as important as price.
Geordie Romer of Leavenworth Washington Real Estate Blog presents his “Top 5 Ways to Shoot Your Leavenworth Condo Project in the Foot.” He actually goes the extra mile and gives six, including “Don’t dismiss the internet as a fad.” Good advice.
Brian Block of Virginia Real Estate News says, “I’ve Officially Run Out of Room on My Business Card” and shares his experience breezing through the broker’s exam and the designations he holds.
Craig Schiller at HOME STAGING, Rants & Ravings presents “OOPS Goes the Staging!” The post is written well. There a lot of bold words, but the post shows how video can help make your point. It would have been great to have some more specific tips and even some examples on good staging. Hopefully that will be in the next post.
Rebecca Levinson of Connect2Agent presents “Do consumers want rock stars or real estate agents to sell their home?” She tells the story of another agent’s attitude and the impression it left on her.
Cliff Jacobson at WebHome USABlog presents, “Realtor Dirty Tricks” where he discusses Glenn Kelman and the NAR.
Tuesday, 30 September 2008
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."
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...
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."
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.
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.
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?
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 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.
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.
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.
“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.
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.
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.
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