‘The biggest bailout in US history’

Currencies, Economic growth, Financial Events, Futures trading, Leverage

Does the US Treasury read the blog? Just hours after the chart below was posted, rumours began to circulate of a major government initiative to try and stabilise financial markets.

The aim, according to Bloomberg, is to move ‘troubled assets from the balance sheets of American financial companies into a new institution’. Bloomberg adds that the ‘effort is a recognition that Paulson’s and Bernanke’s efforts have so far failed to revive financial and housing markets’. The sums being talked are huge, at $800bn for purchasing these assets, and another $400bn to insure money-market funds.

The Wall Street Journal says that the new body may be modelled on ‘the Reconstruction Finance Corporation, a Depression-era relief program formed in 1932 to inject liquidity into the market’. And the New York Times comments that ‘it would be the biggest bailout in US history’. It says that legislators may also decide to bail out homeowners faced with foreclosure, as well as the banks that lent them the money.

The question that has not yet been raised in the discussions, it seems, is ‘Who pays the bill?’ The US Treasury had to borrow an extra $200bn in a hurry this week, to finance the bailouts already agreed (Fannie Mae, Freddie Mac, AIG). Will foreign investors, who initially lent the money that financed the US housing boom, now also be prepared to support the cost of cleaning up after it?

The US$ rallied recently back to ¥110, on hopes that the economy might be about to recover. But major financial market declines rarely end without a currency crisis. The blog noted last November that ‘a fall below 100 yen would take us into uncharted water’. Hopefully, if the US Treasury is indeed reading the blog, they will take this issue into account when they make their proposals to Congress.

PREVIOUS POST

The global stock market decline

18/09/2008

Does the US Treasury read the blog? Just hours after the chart below was posted,...

Learn more
NEXT POST

Financial 'toxic waste'

21/09/2008

Does the US Treasury read the blog? Just hours after the chart below was posted,...

Learn more
More posts
BASF’s second profit warning highlights scale of the downturn now underway
09/12/2018

The chemical industry is easily the best leading indicator for the global economy.  And thanks to K...

Read
Chemistry & the Economy: 2019 Outlook
04/12/2018

There will be no shortage of important topics to discuss on Thursday, at my regular Chemistry and th...

Read
Brexit moves from ‘Snakes and Ladders’ to cricket
02/12/2018

The Brexit debate had appeared to be a simple game of Snakes & Ladders till now.  The Leave cam...

Read
Asian downturn worsens, bringing global recession nearer
25/11/2018

The chemical industry is the best leading indicator for the global economy.  And my visit to Singap...

Read
Your ‘A-Z Guide’ to the Brexit Negotiations
18/11/2018

“The UK is now facing a national crisis”, according to Margaret Thatcher’s former ...

Read
Chemical output signals trouble for global economy
04/11/2018

A petrochemical plant on the outskirts of Shanghai. Chinese chemical industry production has been ne...

Read
Budgeting for the end of “Business as Usual”
28/10/2018

Companies and investors are starting to finalise their plans for the coming year.  Many are assumin...

Read
“What could possibly go wrong?”
21/10/2018

I well remember the questions a year ago, after I published my annual Budget Outlook, ‘Budgeti...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more