WORLD> America
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WORLD> America
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Possible financial crisis fix sends US stocks soaring
(Agencies)
Updated: 2008-09-19 15:04 Christopher Cox, chairman of the securities and Exchange Commission, told lawmakers the SEC may put in a temporary emergency ban on all short-selling -- not just the aggressive forms it already has targeted, according to a person familiar with the matter, speaking on condition of anonymity because no final decision had been made. The ban might apply to stocks of selected financial companies, to all financial companies or even possibly to all public companies. Short-selling, which has been practiced on Wall Street for decades, is not illegal per se. The Fed said it had authorized the expansion of swap lines, the process by which it supplies reserves to other central banks, to include amounts up to $110 billion for the European Central Bank and up to $27 billion for the Swiss National Bank. The Fed also said new swap facilities had been authorized with the Bank of Japan for as much as $60 billion, $40 billion for the Bank of England and $10 billion for the Bank of Canada. For more than a year, investors around the world have watched with growing alarm as the US economy, the world's largest, has struggled to right itself amid massive home foreclosures, many of them from mortgages issued to homeowners with bad credit. The turmoil has swallowed some of the most storied names on Wall Street. Three of its five major investment banks -- Bear Stearns, Lehman Brothers and Merrill Lynch -- have either gone out of business or been driven into the arms of another bank. The Dow's gain of nearly 4 percent on Thursday sent the average back above 11,000 and nearly erased its losses from a day before. But as the uncertainty wore on, investors continued to flock to Treasury securities, considered a haven in times of crisis, and the price of gold rose yet again. And worries about even the safest investments intensified as Putnam Investments abruptly closed a $15 billion money market fund because institutional investors had pulled their cash. Bush canceled out-of-town fundraising trips to Alabama and Florida to stay in Washington and huddle with Paulson and the heads of the Fed and the Securities and Exchange Commission. In an appearance earlier in the day, the US president acknowledged "serious challenges" in the markets and said: "The American people can be sure we will continue to act to strengthen and stabilize our financial markets and improve investor confidence." The credit troubles reverberated around the globe. Asian stocks closed lower. European stocks rose but struggled to hold on to the gains. Russia closed its stock exchanges for a second day, and President Dmitry Medvedev pledged a $20 billion injection into financial markets. In the United States, investors worried for another day about the health of the banks still standing. Earlier in the week, venerable Lehman Brothers was forced into bankruptcy, and Merrill Lynch was driven into the arms of Bank of America. On Thursday, Morgan Stanley scrambled to strike a major deal or raise more cash that will reassure investors and prevent more damage to its battered stock. Its CEO, John Mack, reached out to China's Citic Group overnight about a possible investment, according to a person familiar with the talks. Morgan Stanley is also considering a combination with retail bank Wachovia Corp. and an investment from Singapore Investment Corp., one of the world's biggest sovereign wealth funds, said the person, who spoke on the condition of anonymity because the discussions were still ongoing. On Capitol Hill, lawmakers in both parties became increasingly vocal about their concerns with the Bush administration's handling of the current crisis. Administration officials refused to attend a closed-door briefing with House Republicans this morning, leaving their congressional allies in the dark about the government's $85 billion emergency loan to insurer American International Group, House GOP leader John A. Boehner said. And Sen. Chris Dodd, D-Conn., the Banking Committee chairman, was irritated that Paulson twice canceled appearances he was to have made before the panel this week. |
