Key US mortgage lender collapses

[Che -Guevara]

Federal regulators seized the bank's assets, fearing it might not be able to meet withdrawals by depositors.

 

It is the second-largest financial institution to fail in US history, regulators say.

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[Che -Guevara]

Investors welcomed the news, sending Freddie Mac's shares up 17.6% and Fannie Mae's up 24.9% at the start of Wall Street trade.

 

However by the close of trading both had slid into negative territory, with Fannie Mae falling 5.1% to $9.73, and those of Freddie Mac slid 8.3% to $7.11.

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[Che -Guevara]

Banks batter Wall Street again

Stocks slump on GM news and more worries about the financial services sector fallout. The dollar hits an all-time low versus the euro.

 

 

 

NEW YORK (CNNMoney.com) -- Stocks tumbled Tuesday morning as General Motors' restructuring news and more problems for the troubled financial sector sparked a broad market selloff.

 

The dollar slumped to a new low versus the euro and also fell versus the yen. Bonds rose, lowering the corresponding yields. Oil and gas prices rose.

 

The Dow Jones industrial average (INDU), the Standard & Poor's 500 (SPX) index and the tech-heavy Nasdaq composite (COMP) all declined at least 1% in the early going.

 

Stocks tumbled Monday, with the Dow and S&P 500 ending at 2-year lows, as the failure of IndyMac bank countered any relief about the government plan to rescue Fannie Mae and Freddie Mac. Those worries stretched into Tuesday's session and were compounded by higher oil prices and mixed economic news.

 

Financials fumble. Fannie Mae (FNM, Fortune 500) lost another 16% and Freddie Mac (FRE, Fortune 500) fell 24% in a continued reaction to the government rescue plan.

 

On Sunday, the government announced a plan that would give the two firms, which hold or guarantee nearly $5 trillion worth of mortgages, a bigger line of credit with the Treasury and allow the Treasury to buy stock in the firms.

 

The plan also would allow the companies to borrow directly from the Fed, giving them the same access that commercial banks and Wall Street firms have.

 

Investors were also continuing to react to the failure of IndyMac, now called IndyMac Federal Bank, which was taken over by the federal government late last week.

 

GM. The troubled automaker said Tuesday it will lay off salaried workers, suspend its dividend and sell off $4 billion to $7 billion in assets as a means of getting its business back on track.

 

The sluggish economy, rocketing fuel prices and declining interest in trucks and SUVs have hit the automaker hard over the past few years. GM (GM, Fortune 500) shares rose 1% in early trade. (

 

Bernanke to speak. The Federal Reserve Chairman was testifying Tuesday before the Senate Banking Committee as part of his semi-annual testimony before Congress on the health of the economy.

 

He was also scheduled to discuss recent financial market strain and the government response to Fannie Mae and Freddie Mac and the broader credit crisis. Treasury Secretary Henry Paulson and Exchange Commission Chairman Christopher Cox were also due to speak.

 

Economic news. The morning brought a slew of readings on the health of the economy.

 

Retail sales and sales excluding volatile autos both grew less than expected in June. Both measures also grew less than they had in the previous month.

 

June wholesale inflation jumped 1.8%, topping economists' forecasts, the government reported, reflecting spiking fuel and food costs. However, prices excluding volatile food and energy prices rose less than expected in the month, climbing 0.2% versus forecasts for a rise of 0.3%.

 

Meanwhile, wholesale prices over the last 12 months have risen 9.2%, growing at the fastest pace in 27 years. (Full story)

 

The July NY Empire State index, a closely-watched regional manufacturing report, improved to a reading of minus 4.9 from minus 8.7 in the previous month. Economists thought it would only improve to a reading of minus 8. Any reading that is negative shows weakness in the sector, while a positive reading shows growth.

 

Fuel prices rise. U.S. light crude oil for August delivery rose 23 cents to $145.41 a barrel on the New York Mercantile Exchange.

 

The national average price for a gallon of regular unleaded gas held steady Tuesday at an all-time high of $4.109, unchanged from the previous day, according to AAA. (Full story).

 

Dollar slumps. In currency trading, the dollar fell to a new all-time low versus the euro and also slipped against the yen, amid worries about the credit crisis and its impact on the economy.

 

Other markets. In global trade, European markets tumbled at midday and Asian markets ended lower.

 

COMEX gold for August delivery rose $7.90 to $981.60 an ounce, rising on the weak dollar.

 

In the bond market, Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.83% from 3.85% late Monday. Bond prices and yields move in opposite directions.

[STOIC]

A very close friend of mine works for Fannie Mae in their Washington DC office. I feel bad for their job security.I was speaking to him last night about his plan of buying the share at 8$ dollars after the government decided to save them yesterday, but I guess it didn’t help :confused:

[Che -Guevara]

I don't know how long could the Feds continue bailing out these lenders and other financial power houses. The Feds said there are 90 institutions are on the "problem" list, and the funny thing is IndyMac Bank wasn't even on that list. But I guess in the case of Fannie Mae and Fredddie Mac they do have to step in.

[Ducaysane]

United States Gov will not let Fannie mae and Freddie mac to calapse. They will for sure bail them out. The irony here is these two morgage lenders' profit goes to their share holders but thier losses is socialized, another words, we us a tax payers foot the bill when they need money.

[STOIC]

Che, you should have seen how the list of my Graduate Plus loan has shorten.Many lenders collapsed and opted out.Something is not right somehwere.

 

Ducaysane, you are right.I think the government will not let them go down the drain like that.My freind was explaining to me how this is their first time they are being saved by Uncle Sam.Funny how these lenders can resolve to throw off their failure to the tax-payers.

[Cara.]

OK guys, bottom line: Should I withdraw the $129.84 from my savings account?

[Ibtisam]

^^^Yes dear, please do and put under your rag.

[Cara.]

LOL @ Ibti. There's already a set of gold jujumo there (the real savings account).

[Ibtisam]

^^^Good to know you know where to keep the real saving, this silly excuses of floating money being used and lost is no no no. buy some diamonds, it will always be valuable Keep it save and auction it off when you reach poverty.

 

Run Cara and join the long line of people collecting their savings [although theirs is a bit more than yours] But the less you have the more you need your money, you cannot afford to lose a penny, go, run, run. We'll wait here for you to report back

[STOIC]

Cara, the economy is on the path of destruction.Hear my words.I have a hidden SAFE in my house just send your money through Dahabshiil.I'm so glad you understand how things are going.And please don't keep your money in your dresser drawer.The poor dollar is getting whooped up by Euro,but my hidden SAFE will not Whoop your dollar Phew!

[Pujah]

President Bush:

``It's been a difficult time for many American families,'' he said. Still, he said, the economy is demonstrating ``remarkable resilience.''

 

Bush spoke as Federal Reserve Chairman Ben S. Bernanke was testifying before the Senate Banking Committee, where he said the economy is facing ``significant downside risks'' to growth and the threat of higher inflation.

Enough said ...

[Faarax-Brawn]

Originally posted by Cara:

LOL @ Ibti. There's already a set of gold jujumo there (the real savings account).

How much does a gram of gold go for these days anyway? i need to invest in dahab.(There is an old woman next to my house and she owns kilos i tell ya)

 

Che, this is classic govt bail out. Did you see your wonderful prezz and his watever?

[Che -Guevara]

^The man is moron.

 

Duceysane...Fannie Mae and Freddie Mac is somewhat quasi government agencies. The Feds had and will guarantee their survival. Besides, they own half of the mortgage market.

 

Stoic...I'm glad lenders opted out of student loan business. They were screwing underprivileged real bad by hitting them with high interests. I was happy the government step in and curb this st-upidity. The dam schools are guilty by advising students to take out loans that weren't favorable to them. From what I understand lenders rewarded the school with 'kick backs", vacations to the Carib, Mountain retreats, what have you.