Financial Institutions

Like the crew of a ship taking on water in the middle of a fierce storm, President-elect Barack Obama's financial advisers are facing a new threat that could derail or significantly impede their efforts to spark an economic recovery. The "too big to fail" financial institutions stabilized at a cost of hundreds of billions of dollars last fall are facing trouble again, and members of Congress are hesitant about funding possible future rescues. Many lawmakers are angry, and they have a right to be - management of the first bailout has been sketchy and lacked accountability.

This is an edited excerpt of a San Francisco Examiner editorial, which was published Tuesday.THE BANKING industry is proving to be its own worst enemy in the aftermath of a losing election campaign over excessive automated teller machine fees.Earlier this month, San Francisco voters approved a measure that prohibits banks from charging non-customers a second fee for using their ATMs. Instead of being gracious losers, the banks obtained a temporary injunction.The banks have a public relations disaster on their hands.

WASHINGTON -- With the blessing of the federal government, some of the world's largest financial institutions reached an agreement yesterday to try to set their own industry-wide standards in the huge and volatile market of complex securities known as derivatives.By setting its own voluntary guidelines, the industry hopes to both prevent recurrences of the problems that have arisen in the derivatives markets and keep stricter regulations from being imposed by Washington. But previous attempts at self-regulation in the derivatives markets have met with limited success.

WASHINGTON -- After two decades of industry lobbying, White House and congressional negotiators agreed yesterday to tear down Depression-era financial walls in favor of a free-wheeling market for bank deposits, insurance, stocks and bonds.The historic agreement marks an era of deregulation and free market triumph, when the despair and financial panic that confronted President Franklin D. Roosevelt in the 1930s long since has been replaced by the confident prosperity of President Clinton's 1990s.

WASHINGTON -- With the blessing of the federal government, some of the world's largest financial institutions reached an agreement yesterday to try to set their own industry-wide standards in the huge and volatile market of complex securities known as derivatives.By setting its own voluntary guidelines, the industry hopes to both prevent recurrences of the problems that have arisen in the derivatives markets and keep stricter regulations from being imposed by Washington. But previous attempts at self-regulation in the derivatives markets have met with limited success.

THE RECORD $85 billion merger of Travelers Group Inc. and Citicorp announced last week was the strongest signal yet of erosion in the walls separating various financial services.Unlike mergers between defense companies or entertainment companies, this proposed deal would create a new "category killer" -- in effect, a giant financial megastore offering banking, insurance and brokerage service.Would such a move unleash a new wave of financial service mergers? If so, would that limit consumers' choices and reduce competition?

THE Federal Reserve had little choice when it organized the bailout of the insolvent hedge fund, Long-Term Capital Management. Thefund's collapse would have further unsettled the already jittery world financial markets and could have precipitated a global panic. Maintaining confidence in financial institutions is in everyone's interest.Although the U.S. economy continues to perform magnificently -- producing more jobs and higher incomes with a low rate of inflation -- the economies of Asia, Russia and Latin America are in very weak shape.

When Koinonia Baptist Church was founded five years ago, church members could find only one place that would accept their initial $251 deposit: Ideal Federal Savings Bank."

SAN FRANCISCO -- The Microsoft Corp. said yesterday that it was abandoning its planned $2 billion acquisition of Intuit Inc., which would have been the largest deal ever in the software industry, because of the Justice Department's legal challenge and the possibility of protracted litigation.Scuttling the deal with Intuit, whose Quicken software is by far the most popular personal-finance computer program, will significantly slow Microsoft's entry into the world of electronic commerce and could alter the choices that consumers have among computerized financial and banking services.

IF THE Republicans believe that people ought to be able to make it on their own, why are they proposing to destroy a program that, at practically no cost to the government, gives everyone a fair chance to participate in the capitalist system?The Community Reinvestment Act was adopted in 1977 to underscore what U.S. banking laws have traditionally held -- that financial institutions granted unique privileges by the government have an obligation to serve their communities, including low- and moderate-income areas.

The evidence mounts that the current economic troubles were set in motion because of systemic fraud. I keep thinking about Bernard L. Madoff's comment when F.B.I. agents were about to arrest him. Asked if he could explain what he had done in his Ponzi scheme, he replied, "There is no innocent explanation." Fact is, there is no innocent explanation for the actions of the financial elites and their bought-and-paid-for political lackeys. It's one thing for people like me to speak or write about the crimes that set this collapse in motion, but it's another and far more damaging thing to have well-placed experts in finance point the accusing finger at those responsible for the financial crisis.

The Obama administration is proposing the most far-reaching reforms of the financial industry since the Depression - including measures that would for the first time regulate hedge funds and give government the power to seize and dismantle companies deemed a threat to the economy. The measures, which must be approved by Congress, come in the wake of last fall's near-meltdown of the global banking system and in advance of next week's meeting of the Group of 20 economic powers. The key measures outlined by Treasury Secretary Timothy F. Geithner on Thursday include: * Giving the Federal Reserve or another agency the authority to oversee the entire economy for signs of "systemic risk."

President Barack Obama has vowed to reform financial regulations and tighten oversight of banks to prevent a repeat of the financial crisis that has plunged the U.S. economy into deep recession. It's a promise that must be kept because it is vital to re-establishing the trust of the American people in the stability of the financial institutions that provide the lifeblood of commerce. Members of Mr. Obama's economic team are expected to propose stricter federal rules for hedge funds, credit rating agencies and mortgage brokers, and greater oversight of the complex financial instruments that have contributed to the current economic crisis.

Like the crew of a ship taking on water in the middle of a fierce storm, President-elect Barack Obama's financial advisers are facing a new threat that could derail or significantly impede their efforts to spark an economic recovery. The "too big to fail" financial institutions stabilized at a cost of hundreds of billions of dollars last fall are facing trouble again, and members of Congress are hesitant about funding possible future rescues. Many lawmakers are angry, and they have a right to be - management of the first bailout has been sketchy and lacked accountability.

A FGHANISTAN - The country, the conflict, the casualties overtook Iraq as the war on everyone's mind this year. With the death toll among Americans rising at an alarming rate and the Taliban forces resurgent, a question keeps repeating: How do we win? B AILOUT - This fall, with America's financial infrastructure crumbling, Treasury Secretary Henry M. Paulson Jr. persuaded Congress to appropriate $700 billion to help bail out troubled institutions. So far, $350 billion has been invested or lent to more than two dozen banks and financial institutions.

Principles to govern a fair bailout bill As an ordinary citizen, I would like to put forth a series of points that I feel should be the basis for a plan to deal with the immediate and systemic causes of our current financial crisis ("Credit crunch," Oct. 1). * Bankruptcy judges should be permitted to modify the terms of a mortgage or write down the value of a loan for a primary residence that has not yet been foreclosed. * Extraordinary effort should be made by financial institutions that own bundled mortgages to identify each and every physical property owned to minimize fraud and demand accountability for asset ownership.

'Bailout' is an effort to protect Main Street In "OK, so where's the Boscov bailout?" (Sept. 23), Dan Rodricks once again proves that he just doesn't get it. The government's proposal to buy back bad mortgage debt is not a "bailout" for greedy Wall Street firms that made wrong bets. To the contrary, it is a bold and aggressive action intended to save the entire American economy from the painful contraction that could ensue if the current collapse of confidence in financial markets is allowed to continue unabated.

WASHINGTON - The Bush administration, moving to prevent an economic cataclysm, urged Congress yesterday to grant it far-reaching emergency powers to buy hundreds of billions of dollars of distressed mortgages despite many unknowns about how the plan would work. Treasury Secretary Henry M. Paulson Jr. made it clear that the upfront cost of the rescue proposal could easily be $500 billion, and outside experts predicted that the bill could reach $1 trillion. The outlines of the plan, described in conference calls to lawmakers yesterday, include buying only from U.S. financial institutions - but not hedge funds - and hiring outside advisers who would work for the Treasury, rather than creating a separate agency.

Baltimore-based Provident Bankshares Corp., facing multimillion-dollar losses in a souring credit environment, said yesterday that it is cutting by two-thirds its dividend to shareholders and raising $115 million from investors to strengthen its financial position. It is the latest in a long line of banks that nationwide have been stung by the rapid deterioration in the housing and financing markets. As home prices fall and foreclosures rise, more financial institutions have needed infusions of cash - and not all have been able to get them.

NEW YORK -- Citigroup, the nation's largest bank, reported a staggering fourth-quarter loss of $9.83 billion yesterday and issued a sobering forecast that the housing market and the broader economy still had not bottomed out. To shore up their finances, Citigroup and Merrill Lynch & Co., which has also been rocked by the subprime mortgage debacle, both were forced again to go hat in hand for cash infusions from investors in the United States, Asia and...