America’s Banks Are Failing–The Handwriting IS On the Wall
The Associated Press reported on July 11:
“The last thing the Bush White House and the rest of the country needed in these economically trying times was another financial crisis. But they got one. The Republican administration and Democratic-run Congress now are facing the possibility that mortgage giants Fannie Mae and Freddie Mac, once staid and stable, could need a bailout or even go under. Their default would send shock waves through already distressed financial markets, drive the U.S. economy further into recession territory and make it even harder for people to obtain mortgages or refinance their homes…
“Bush told reporters that [Treasury Secretary Henry] Paulson had briefed him on financial markets and ‘assured me that he and (Federal Reserve Chairman) Ben Bernanke will be working this issue very hard. Freddie Mac and Fannie Mae are very important institutions,’ Bush said.
“Bush, the first U.S. president with an MBA degree, may have been assured, but investors apparently weren’t. They dumped stocks in response to the woes of Freddie and Fanny, pushing the Dow Jones industrials at one point below the 11,000 mark for the first time in two years before recovering slightly. The two companies’ stocks are now at their lowest levels in 16 years, down 80 percent from just a year ago.”
Please make sure to watch our recent StandingWatch program on YouTube titled, “Coming–The Great Depression?”
Fannie Mae and Freddie Mac–an “Unmitigated Disaster”
Bloomberg reported on July 14:
“The U.S. Treasury Department’s plan to shore up Fannie Mae and Freddie Mac is an ‘unmitigated disaster’ and the largest U.S. mortgage lenders are ‘basically insolvent,’ according to investor Jim Rogers. Taxpayers will be saddled with debt if Congress approves U.S. Treasury Secretary Henry Paulson’s request for the authority to buy unlimited stakes in and lend to Fannie Mae and Freddie Mac, Rogers said in a Bloomberg Television interview. Rogers is betting that Fannie Mae shares will keep tumbling…
“‘I don’t know where these guys get the audacity to take our money, taxpayer money, and buy stock in Fannie Mae,’ Rogers, 65, said in an interview from Singapore. ‘So we’re going to bail out everybody else in the world. And it ruins the Federal Reserve’s balance sheet and it makes the dollar more vulnerable and it increases inflation.’… The U.S. economy is in a recession, possibly the worst since World War II, Rogers said. ‘They’re ruining what has been one of the greatest economies in the world,’ Rogers said… ‘[They] are bailing out their friends on Wall Street but there are 300 million Americans that are going to have to pay for this.”’
US Government Not to Expect to Help More Lenders
The Associated Press reported on July 13:
“The U.S. government is signaling it won’t throw a lifeline to struggling financial companies – except for mortgage linchpins Fannie Mae and Freddie Mac – marking a shift to a new and potentially more volatile phase of the credit crisis.
“Such an approach could mean beaten-down investment banks like Lehman Brothers Holdings Inc. and regional banks must now fend for themselves as they try to recover from billions of dollars in mortgage-related losses. That is bound to unnerve Wall Street, already anxious as it awaits financial companies’ earnings reports that are expected to be down a stunning 69 percent from a year ago when all the numbers are in…
“‘The credit crisis has obviously entered into a new phase – the government has one bailout left in them, and this is it,’ said Jeffrey Gundlach, chief investment officer of TCW Group in Los Angeles, which invests $160 billion. ‘One consequence of Freddie and Fannie is that other firms are allowed to go under,’ he said.”
IndyMac Bank Seized by Federal Regulators
The Los Angeles Times reported on July 12:
“The federal government took control of Pasadena-based IndyMac Bank on Friday in what regulators called the second-largest bank failure in U.S. history. Citing a massive run on deposits, regulators shut its main branch three hours early, leaving customers stunned and upset…
“Based on a preliminary analysis, federal authorities said the takeover of IndyMac, which had $32 billion in listed assets, would cost the FDIC between $4 billion and $8 billion. Regulators said deposits of up to $100,000 were safe and insured by the FDIC. IndyMac’s failure had been widely expected in recent days. As the bank was shuttering offices and laying off employees to cope with huge losses from defaulted mortgages made at the height of the housing boom, nervous depositors were pulling out $100 million a day. The bank’s stock price had plummeted to under $1 as analysts predicted the company’s imminent demise.
“The takeover of IndyMac came amid rampant speculation that the federal government would also have to take over lenders Fannie Mae and Freddie Mac, which together stand behind almost half of the nation’s mortgage debt.”
Reuters reported on July 14:
“IndyMac Bancorp Inc customers lined up outside a branch at the company’s headquarters on Monday, hoping to withdraw their money after regulators seized what was once one of the largest mortgage lenders in the United States… IndyMac is the fifth U.S. banking company to fail this year, and the largest since the 1980s savings-and-loan crisis… Gerard Cassidy, an analyst at RBC Capital Markets, on Sunday estimated that 300 U.S. banks might fail over the next three years because of credit losses and tight capital markets…”
U.S. Economic Tempest Overtakes Europe
On July 16, Der Spiegel Online re-published the following article from the New York Times:
“Spain, Ireland and Denmark are either in a recession or on the brink. Italy is stagnating. France is weakening fast. And Germany, the sturdy locomotive of European growth, is suddenly faltering — dashing most residual hopes that Europe could escape the upheaval in the United States. On Tuesday, an influential poll of German investors by the Center for European Economic Research in Mannheim found that confidence had plummeted to its lowest level since the survey was started in 1991…
“While most economists had predicted that Europe would suffer fallout from the financial market chaos and the broader American malaise, the speed of the deterioration has been surprising… The tense mood in the United States is pushing investors to sell dollars and seek refuge in the euro. For all the storm clouds here, Europe still looks like a safe harbor in comparison to the United States… Still, the strong euro — combined with high oil prices — is exacting a toll on Europe’s export machine.”
How long will Europe allow the weak U.S. dollar to damage or destroy its economy? When will Europe begin to make drastic changes? For sure, it can’t be too long from now. For more information, please read our free booklet, “Europe in Prophecy.”
Temporary Rebound of the U.S. Dollar
Der Spiegel Online wrote on July 17:
“The greenback staged a surprising, though brief, rally when oil prices fell. But don’t mistake an uptick for a bottom.
“On July 15, traders in Europe knocked the dollar to an all-time low of $1.6020 to the euro and a three-month low against the British pound. It was hardly a surprise: Investors around the world were appalled by the US government’s need to rescue the multitrillion-dollar mortgage behemoths, Fannie Mae and Freddie Mac, last weekend… The Asian markets duly punished banks that held Fannie and Freddie paper.
“But to the surprise of many traders, instead of plunging to uncharted depths, the dollar managed to bounce back and was trading at about 1.584 to the euro on July 16. ‘A lot of hedge funds were confused by the price action,’ says Stephen Jen, currency strategist at Morgan Stanley in London.
“Jen and other analysts think several factors have helped — at least, so far — to keep the dollar from going into the out-of-control downward spiral that many fear could be coming. For one thing, the greenback is already quite cheap, especially against the euro, making investors wonder how much lower it can go. But what may be even more important is that the wave of economic misery that began in the US last year is clearly starting to hit European economies, as well.
“… the dollar’s decline is hurting the US, because the weakness is being passed along to consumers in the form of higher energy prices, which, among other things, have largely negated the Bush Administration’s tax rebates.
“Awareness in the markets that intervention [of the U.S. government] is a growing possibility is probably another reason the dollar didn’t plunge further on July 16. The sharp selloff in oil prices that began on July 15 was also positive for the dollar. Indeed, the fact that the greenback kept its head above water could signal a turn, or at least a temporary bottom. But don’t count on it.”
US Faces Global Funding Crisis
The Telegraph wrote on July 15:
“Merrill Lynch has warned that the United States could face a foreign ‘financing crisis’ within months as the full consequences of the Fannie Mae and Freddie Mac mortgage debacle spread through the world. The country depends on Asian, Russian and Middle Eastern investors to fund much of its $700bn (£350bn) current account deficit, leaving it far more vulnerable to a collapse of confidence than Japan in the early 1990s after the Nikkei bubble burst. Britain and other Anglo-Saxon deficit states could face a similar retreat by foreign investors…”
President Bush Backs Israeli Plan for Strike on Iran
The Sunday Times wrote on July 13:
“President George W Bush has told the Israeli government that he may be prepared to approve a future military strike on Iranian nuclear facilities if negotiations with Tehran break down, according to a senior Pentagon official. Despite the opposition of his own generals and widespread scepticism that America is ready to risk the military, political and economic consequences of an airborne strike on Iran, the president has given an ‘amber light’ to an Israeli plan to attack Iran’s main nuclear sites with long-range bombing sorties, the official told The Sunday Times.
“’Amber means get on with your preparations, stand by for immediate attack and tell us when you’re ready,’ the official said. But the Israelis have also been told that they can expect no help from American forces and will not be able to use US military bases in Iraq for logistical support.
“Nor is it certain that Bush’s amber light would ever turn to green without irrefutable evidence of lethal Iranian hostility. Tehran’s test launches of medium-range ballistic missiles last week were seen in Washington as provocative and poorly judged, but both the Pentagon and the CIA concluded that they did not represent an immediate threat of attack against Israeli or US targets.
“’It’s really all down to the Israelis,’ the Pentagon official added. ‘This administration will not attack Iran. This has already been decided. But the president is really preoccupied with the nuclear threat against Israel and I know he doesn’t believe that anything but force will deter Iran.’ …
“Senator Barack Obama’s previous opposition to the war in Iraq, and his apparent doubts about the urgency of the Iranian threat, have intensified pressure on the Israeli hawks to act before November’s US presidential election. ‘If I were an Israeli I wouldn’t wait,’ the Pentagon official added…
“The one thing that all sides agree on is that any strike by either Iran or Israel would trigger a catastrophic round of retaliation that would rock global oil markets, send the price of petrol soaring and wreck the progress of the US military effort in Iraq… How genuine the Iranian threat is was the subject of intense debate last week, with some analysts arguing that Iran might have a useable nuclear weapon by next spring and others convinced that President Mahmoud Ahmadinejad is engaged in a dangerous game of bluffing…
“Obvious targets would include Iran’s Isfahan plant, where uranium ore is converted into gas, the Natanz complex where this gas is used to enrich uranium in centrifuges and the plutonium-producing Arak heavy water plant. But Iran is known to have scattered other elements of its nuclear programme in underground facilities around the country. Neither US nor Israeli intelligence is certain that it knows where everything is.”
Whom to Believe…?
Reuters reported on July 11:
“An Israeli military spokesman described as ‘utterly baseless’ media reports on Friday about Israeli warplanes secretly training in U.S.-controlled Iraq for possible attacks on neighbouring Iran. The Baghdad government and the Pentagon similarly played down a report, carried on the website of the Jerusalem Post and quoting a Iraqi news network, that Israeli jets were practising in Iraqi airspace and landing on U.S. airbases in the country… Recent months have seen a flurry of high-level contacts between Israel and the United States, which accuse Iran of trying to develop nuclear weapons. Tehran denies the charge.
“The talks have stoked global speculation that the allies are planning pre-emptive military strikes… The Iraqi report carried by the Jerusalem Post referred to an airbase in western Anbar province near the town of Haditha. The airbase is controlled by the U.S. military. The Israeli newspaper said it could not confirm the veracity of the report.
“Security for Anbar is still formally in the hands of the U.S. military, although control is expected to be transferred to Iraqi security forces soon. Iraq has security control over nine of its 18 provinces.”
Iran and the Bomb
The Wall Street Journal wrote the following on July 15, voicing the opinion that military confrontation in the near future between Israel and Iran appears more and more likely–perhaps with the support of the USA. Please make sure to watch our new StandingWatch program on YouTube, titled, “”Is War With Iran Coming Soon?
“Iran’s test salvo of ballistic missiles last week together with recent threatening rhetoric by commanders of the Islamic Republic’s Revolutionary Guards emphasizes how close the Middle East is to a fundamental, in fact an irreversible, turning point.
“Tehran’s efforts to intimidate the United States and Israel from using military force against its nuclear program, combined with yet another diplomatic charm offensive with the Europeans, are two sides of the same policy coin. The regime is buying the short additional period of time it needs to produce deliverable nuclear weapons, the strategic objective it has been pursuing clandestinely for 20 years.
“Between Iran and its long-sought objective, however, a shadow may fall: targeted military action, either Israeli or American… If Iran reaches weaponization… the Middle East, and indeed global, balance of power changes in potentially catastrophic ways. And consider what comes next for the U.S.: the Bush administration’s last six months pursuing its limp diplomatic efforts, plus six months of a new president getting his national security team and policies together. In other words, one more year for Tehran to proceed unhindered to ‘the point of no return.’
“We have almost certainly lost the race between giving ‘strong incentives’ for Iran to abandon its pursuit of nuclear weapons, and its scientific and technological efforts to do just that. Swift, sweeping, effectively enforced sanctions might have made a difference five years ago. No longer…
“That is why Israel is now at an urgent decision point: whether to use targeted military force to break Iran’s indigenous control over the nuclear fuel cycle at one or more critical points… The alternative is Iran with nuclear weapons, the most deeply unattractive alternative of all… What will the U.S. do if Israel decides to initiate military action?…
“Israel sees clearly what the next 12 months will bring, which is why ongoing U.S.-Israeli consultations could be dispositive. Israel told the Bush administration it would destroy North Korea’s reactor in Syria in spring, 2007, and said it would not wait past summer’s end to take action. And take action it did… we should be intensively considering what cooperation the U.S. will extend to Israel before, during and after a strike on Iran. We will be blamed for the strike anyway, and certainly feel whatever negative consequences result, so there is compelling logic to make it as successful as possible. At a minimum, we should place no obstacles in Israel’s path, and facilitate its efforts where we can. These subjects are decidedly unpleasant. A nuclear Iran is more so.”
Could Iran Strike Europe with Missiles?
Reuters wrote on July 15:
“The Pentagon said on Tuesday that Iran has the ability to launch a ballistic missile capable of hitting sections of eastern and southern Europe… Older versions of the Shahab-3 have a 800-mile (1,300-km) range. But a new extended version is believed to have a range of up to 1,250 miles, making it capable of hitting targets as far away as Greece, Serbia, Romania and Belarus.”
“Two Coffins for a Murderer”
Der Spiegel Online wrote on July 16:
“Some had hoped that Ehud Goldwasser and Eldad Regev [Israeli soldiers who were abducted in the 2006 raid] still lived. But on Wednesday, a deal negotiated by German intelligence led to Hezbollah handing over two coffins with their remains. In exchange, Israel turned over a brutal murderer — and a bit of its dignity… ‘Today is a great victory for the resistance movements and for Hezbollah,’ said Hamas spokesman Sami Abu Zuhri. ‘It shows that the only successful way to free the prisoners is by kidnapping soldiers’…
“That Olmert and his cabinet… agreed to the deal on Tuesday was largely attributable to the government’s weakness domestically. For months, the prime minister has been plagued by corruption investigations…”
Chaos and Upheaval in Belgium
Der Spiegel Online reported on July 16:
“Chaos has returned to Belgium’s capital: The government has collapsed, the prime minister has offered his resignation. German newspapers on Wednesday wonder if the linguistically divided country will ever get its act together. The Belgian Prime Minister Yves Leterme threw in the towel late on Monday night, saying he could not force through a consensus between the Flemish and French-speaking coalition partners…
“The left-leaning Die Tageszeitung writes: ‘In terms of economics, Belgium is the most successful “failed state” of all time. Its per capita income is way ahead of Germany, the world’s leading exporter… Belgium can continue to flourish without a national government for the simple reason that the cabinet doesn’t have to decide much anyway. Most authority has devolved to the regions … The central government is left to deal with foreign policy, defense and finance policy — all issues that are increasingly taken care of at the EU level… The Belgian government still controls spending on social welfare. And this is where the conflict has blown up between the two language groups, because rich Flanders wants to pay less for poorer Wallonia…’
“The conservative Die Welt writes: ‘Belgium had always prided itself on being a model for Europe: exemplifying, through the art of compromise and the virtue of tolerance, how nations and cultures can exist peacefully side by side. The country can no longer claim this. The latest political crisis sees the kingdom moving towards the limits of being governable… The question is how much solidarity people are prepared to show when times are tough… In the end it’s all about money.'”
EU’s Galileo Satellite for Military Use
Deutsche Welle reported on July 10:
“The European Parliament in Strasbourg approved by 502 votes to 83 the military use of the European Union’s Galileo satellite. The bill, proposed by German conservative politician Karl von Wogau, aims to create a space surveillance system to watch out for space debris and other threats. It was approved on Thursday, July 10. Changes to the bill proposed by the Greens to use the system purely for civilian purposes were rejected. Secure, independent and sustainable access to space was a basic requirement for the EU, the text of the draft bill said.
“The system was about acquiring information so that the EU could prevent conflicts, be effective during crises and increase world security by, for example, monitoring the proliferation of weapons of mass destruction. ‘The EU and NATO are expressly called upon to start up a strategic dialogue on the politics of space and missile defense,’ the text of the bill said.”
America’s Shrinking Influence in the World
Der Spiegel Online wrote on July 11:
“There is little consensus on whether the G-8 summit can be seen as a success for the climate. What is certain is that US President George W. Bush had little part in the efforts to save the world. He didn’t lead, he only followed — and the American superpower never before looked as small as it did this week… the president doesn’t want to understand and he doesn’t even want to go for a walk. That’s why at the meeting of the world’s eight most industrialized nations the most powerful man in the world had to have the world explained to him by seven less powerful leaders.”
“This Bud Is For the EU”
The Associated Press reported on July 14:
“The maker of the King of Beers has agreed to go to work for the Belgian brewer InBev SA. Anheuser Busch Cos. said early Monday it had agreed to a sweetened $52 billion takeover bid from InBev, creating the world’s largest brewer… InBev is the world’s second-largest beer-maker, narrowly behind SABMiller. Swallowing Anheuser-Busch sees it leap ahead, capturing half of the U.S. beer market and a fifth of China and Russia… To some in St. Louis, losing Anheuser-Busch to a foreign buyer meant losing a little bit of history. From college buildings to theme parks to offices to the stadium where the Cardinals play baseball, the Busch name is virtually everywhere in the Gateway City.”
Religion and War
USA Today published an interesting article on July 14 about religion and war. Although much of the article must be rejected as inaccurate interpretation, here are a few worth-while excerpts:
“The specter of violent religion certainly hangs over us in these times, especially when it comes to certain followers of the world’s two dominant religions. Christian and Muslim conflict-mongers drone on against ‘Islamic terrorists’ and ‘Christian infidels,’ respectively, while violence continues erupting in the name of Islam, and conservative Christian figures in America… urge violent solutions to foreign policy problems…
“Yes, there appears to be considerable truth to the oft-heard claim that Christian-Muslim co-existence must be achieved lest our collective future turn out brief and brutal…
“As demonstrated by James Carroll’s powerful and dark new documentary, Constantine’s Sword, Christians over the centuries have too often wielded religion as a lethal weapon. Today that dubious distinction is most strongly associated with violent extremists from the Muslim world, who invoke Islam in terrorist strikes that have killed many thousands of innocents… Judaism, too, has had its spasms of violence, as have other major faiths and sects…
“So how we will know religion in the final analysis? By its peace or by its violence? The scriptures have had their say. It’s now up to the believers — through their words and works — to settle the account.”