Global Economy - Printable Version

Global Economy - Printable Version

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Global Economy - ramana - 10-14-2008

Anyof you recall the early 2003 studies by RAND and Goldman Sachs BRIC report and discussions at BRF-IF mtgs? I think we need to keep an eye on events and see how they play out wrt those reports. Most liekly the overtaking will occur earlier than predicted. 2015 - 2018 was the time period. And Suraj had shown that even 2018 was incorrect based on the existing GDP data for India. The key is to turn the black money / parallel economy to white or mainstream economy and realise its benefits.

How are the Swss doing? Any chances of getting it in their shorts?

Global Economy - Guest - 10-14-2008

QUOTEHow are the Swss doing? Any chances of getting it in their shorts? 
They are also effected. According to sources, this is liberal attack on Captialism. It was well orchestrated, check just today Soros came about with his book.
I hope Bush name the name.

For India, we have to watch, they are heading for perfect storm.
China is not even sneezing, they are still doing drama in front of TV.

Global Economy - dhu - 10-14-2008

QUOTE(ramana @ Oct 14 2008, 01:03 AM)Anyof you recall the early 2003 studies by RAND and Goldman Sachs BRIC report and discussions at BRF-IF mtgs? I think we need to keep an eye on events and see how they play out wrt those reports. Most liekly the overtaking will occur earlier than predicted. 2015 - 2018 was the time period. And Suraj had shown that even 2018 was incorrect based on the existing GDP data for India. The key is to turn the black money / parallel economy to white or mainstream economy and realise its benefits.

How are the Swss doing? Any chances of getting it in their shorts?
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Please explain the forecasts. Who will overtake whom? BRIC will overtake Westerners? The current "crisis" is probably an internal western colonialism. The havoc previously wrought by speculators/western agencies on hapless nations like Thailand can no longer gain traction in Asia and are thus being directed to the internal western economy.

Global Economy - Guest - 10-14-2008

QUOTEThe current "crisis" is probably an internal western colonialism.
I think Marxist leaning elites attack.

Global Economy - Guest - 10-14-2008

QUOTECOMMITIEE ON OVERSIGHT AND GOVERNMENT REFORM
2157 RAYBURN HOUSE OFFICE BUILDING
WASHINGTON, DC 20515-6143
MAJORITY (202) 225-5051
FACSIMILE (202) 225-4784
MINORITY (202) 225-5074
www.oversight.house.gov

October 2, 2008

Mr. George Soros
Chairman
Soros Fund Management, LLC
888 Seventh Avenue, 33rd Floor
New York, NY 10106

Dear Mr. Soros:
The Committee on Oversight and Government Reform is conducting an investigation into the causes and effects of the financial crisis on Wall Street. As part of this investigation, the Committee will be holding a hearing on the role of hedge funds in our financial markets and their regulatory and tax status. I am writing to request your testimony about these issues before the Committee on Thursday, October 16,2008, at 10:00 a.m. in Room 2154 of the Rayburn House Office Building.

I ask that you be prepared to testify about whether hedge funds, including yours, pose systemic risks to the financial markets; whether the lack of federal regulation of hedge funds is appropriate; whether the terms of your compensation and those of other hedge fund executives promote excessive risk taking; and whether the special tax treatment of the compensation of hedge fund managers is warranted.
In order to assist the Committee in preparing for this hearing, I ask that you provide the following documents and information for the time period from January 1, 2005, to the present:

1. A list of all hedge funds under your control, the total assets under management of each fund at the end of each year, and all private placement memoranda and other reports to investors relating to those hedge funds.
2. Documents sufficient to show the value and nature of each hedge fund's position at the end of each year in mortgage-backed securities, collateralized debt obligations, credit default swaps, and other securities or derivatives, and the amount of leverage used by each fund.
3. All documents, including e-mails, drafted, sent, or received by you relating to (a) the level of risk or leverage associated with your hedge funds or other hedge funds;
(b) the Mr. George Soros October 2, 2008 likelihood that your hedge funds or other hedge funds could suffer significant losses or collapse; or Â© the systemic risk or impact on the economy that could follow from significant losses by or collapse of your hedge fund or other hedge funds.
4. The compensation paid to you and the next two highest paid officers in your firm and the formula used to calculate this compensation. Please include with your response a table showing the compensation paid to each individual, broken out by year and type of compensation (e.g., overhead fee, carried interest, bonus, etc.).
5. All documents, including e-mails, drafted, sent, or received by you relating to the tax treatment of compensation to hedge fund managers.
You should provide the documents and information to the Committee by 12:00 noon on Thursday, October 9, 2008. In addition, I ask that you advise the Committee by 12:00 noon on Monday, October 6, 2008, whether you will comply with this request on a voluntary basis.
The Committee on Oversight and Government Reform is the principal oversight
committee in the House of Representatives and has broad oversight jurisdiction as set forth in House Rule X. Attachments to this letter provide additional information for witnesses appearing before the Committee and about how to respond to the Committee's request for documents and information.
If you have any questions about this request, please contact me or ask your
representatives to contact Theodore Chuang or Erik Jones of the Committee staff at (202) 2255420.
Sincerely,
Henry A. Waxman
Chairman
Enclosures
cc: Tom Davis
Ranking Minority MemberÂ
http://oversight.house.gov/documents/20081002120615.pdf

Global Economy - acharya - 10-15-2008

People's Daily Overseas Edition, China
The End of Americaâs Solitude of Victory

Izvestia, Russia
China Is No Friend of the United States
By Pavel Arabov and Petr Inozemtsev

The Hankyoreh, South Korea
âThe Beginning of the Endâ of the American Empire

Global Economy - dhu - 10-15-2008

expanding the above article:

QUOTEâThe Beginning of the EndâÂ of the American Empire

By Jo Hyo-je, Translated By Yeunmee Ryu, 9 October 2008
South Korea - The Hankyoreh - Original Article (Korean)

While preparing a book review for 'European Universalism' by Immanuel Wallerstein, recently translated and published, I began to wonder about the historical significance of the Wall Street financial crisis. I looked for articles that deal with the problem at a macro level for an economical analysis. To my surprise, it was quite a few people who usually didnât speak of American imperialism or who werenât classified as radicals who were bringing out a very pessimistic outlook. Moreover, even some neocon theorists were bringing the same judgment. If even centrists or conservatives see gloomy America, now there are more reasons to take a cool view of this country not only by political views but also practical bases. It is thought that there are largely three sets of arguments under way.

Firstly, where to find a historical precedent for the present situation? A majority of critics compare this crisis to the Great Depression of 1929. However, economic historian Scott Reynolds Nelson points out that the âoriginalâ Great Depression of the 19th century was a lot more similar to today. Due to âthe Panic of 1873â which started in Eastern Europe, swept over Western Europe and finally swallowed America, more than 100,000 people lost their jobs in no time just in New York and armed riots broke out in a lot of eastern cities. He also believes this is what spawned a wave of American religious fundamentalism. Why is this case important? Itâs because the situation of 1873 paradoxically moved the center of world economy from Europe to America. If we accept this theory, itâs highly probable that todayâs incident provided a chance to shift the pivot of world economy from America to China and India.

Secondly, where was America when it had to deal with this Situation? A rash war in Middle East and an astronomical debt immediately come to mind. But there is one more matter we shouldnât miss. Every empire needs not only âhard powerâ such as military force, but also âsoft powerâ. A written constitution, amendments of Federal Constitution known as the Bill of Rights, independent judicial branch were Americaâs main âexportsâ since the modern era. The American Supreme Court is the worldâs oldest court established by constitution. Traditionally, American Constitution and cases of the Supreme Court had been cited often in other countriesâ courts. However, the frequency of citing American cases in other countries such as Canada, Australia, India, New Zealand, and The Republic of South Africa decreased rapidly after the Bush administration. Judges of these countries no longer tend to cite the law of the nation that is neither popular in the international society nor just. The nation met with economic crisis when itâs already in trouble of hard power and soft hegemony.

Thirdly, then is America beginning to go downhill now? John Gray, following Isaiah Berlin as a leading figure in Britainâs contemporary liberalism political philosophy, sees this financial crisis as the similar level with the fall of the Soviet Union. It means that the worldâs geopolitical power domain is irrevocably changed. âHow symbolic yesterday that Chinese astronauts take a spacewalk while the US Treasury Secretary is on his knees.â Then again, international political scientist Robin Niblett doesnât even admit Americaâs relative weakening. He says that countries like Russia, China, and India are not competent enough to be Americaâs substitute for various reasons. Whoâs right? Itâs difficult to make an immediate conclusion. Yet, assuming America has entered âthe beginning of the endâ as in Churchillâs expression, changing our intellectual compass and mode of life is more likely a wise and safe choice. We might be having a rare historical experience - directly witnessing the fall of the Soviet Union and the beginning of the collapse of American empire, in one generation's "moment".

Global Economy - Guest - 10-15-2008

India Cuts Cash Reserve Ratio, Pledges Funds to Banks QUOTEOct. 15 (Bloomberg) -- India cut the amount of deposits lenders need to set aside as reserves and said it will provide funds for banks to tackle a global credit crunch that threatens to plunge the world into a recession.

The Reserve Bank of India reduced its cash reserve ratio to 6.5 percent from 7.5 percent, the second cut in a week, according to a statement in Mumbai. The move will add 400 billion rupees ($8.2 billion) into the financial system. India accelerated loan payments to banks and doubled the overseas investment limit in corporate bonds to shore up the rupee from near a record low.


They are tanking. All 401K money is out of India now.
1 USD = Oct 15 48.885

Global Economy - Guest - 10-15-2008

QUOTEItâs because the situation of 1873 paradoxically moved the center of world economy from Europe to America. If we accept this theory, itâs highly probable that todayâs incident provided a chance to shift the pivot of world economy from America to China and India.
India's fundamentals are very weak, plus socialist agenda will sink it further.
Other problem, PM of India who collects his pension from US body World Bank had no interest of India.

During current crisis, Chinese Yuan Exchange Rate remain mainly same, How this happened? For long China kept its currency under value, now with crisis, it may found its original value. China is still a mystery.

Global Economy - Guest - 10-15-2008

Citigroup Curbs Foreign-Student Loans at Harvard, MIT 
This will effect Universities. Every state is asking universities to cut budget, it means no new hiring and less number of students enrolling next year.

Global Economy - acharya - 10-16-2008

QUOTEFed: Economy sinks deeper into rut
By JEANNINE AVERSA â 52 minutes ago
WASHINGTON (AP) â The country has sunk deeper into an economic rut, the Federal Reserve reported Wednesday, reflecting mounting damage from the financial and credit crises.

The Fed's new snapshot of business conditions around the nation showed economic activity weakened across all of the Fed's 12 regional districts. Consumer spending â which accounts for more than two-thirds of economic activity â slumped in most Fed regions. Manufacturing also slowed in most areas.

Some businesses had become more pessimistic about the economic outlook, the Fed said.

The survey was released shortly after Fed Chairman Ben Bernanke, in a speech in New York, warned that it would take time for the country's economic health to mend even if badly needed confidence in the U.S. financial system returns and roiled markets stabilize.

In an unprecedented action last week, the Fed and other major central banks sliced interest rates to prevent the financial crisis from plunging the U.S. â and the global economy â into a long and painful recession.

Many economists believe the Fed might lower its key rate â now at 1.50 percent â again later this month at its regularly scheduled meeting.

Consumers are pulling back, raising the odds the economy will contract later this year and early next year. Some think the economy may have jolted into reverse in the recently ended third quarter. One classic definition of a recession is two straight quarters of contracting economic activity.

Shoppers are becoming more price conscious and credit is even harder to come by, factors sapping sales at the nation's retailers, the report said. Given this, retailers foresee a "weaker economic outlook, including a slow holiday season," the Fed said.

Vanishing jobs, shrinking paychecks, dwindling nest eggs and falling home values all are making consumers more cautious and less inclined to spend, slowing the overall economy. Retail sales, auto sales and tourism all turned weaker, the Fed said.

The Fed report is based on information supplied by the Fed's 12 regional banks. The information was collected before Oct. 6, which began one of the worst weeks in Wall Street's history.

Global Economy - Guest - 10-16-2008

Any link where I can find yearly India's detail crop production/sown information.

Global Economy - Guest - 10-16-2008

Sensex down nearly 700 points; Reliance plunges 10%QUOTEThe Sensex is trending lower on the back of heavy selling pressure in index heavyweights. The Sensex is now down 662 points at 10,147.

The NSE Nifty is down 203 points at 3,135

Global Economy - Guest - 10-17-2008

US aftershocks rattle India
Balbir Punj

Global Economy - shamu - 10-17-2008

I asked this question earlier:
QUOTE(shamu @ Oct 12 2008, 01:20 PM)Is there any Russia hand in pricking American economic bubble?
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Putin May Use Credit Crisis to Finish Reining in Oligarchs
....
All this marks a reversal from a decade ago, when oligarchs bankrolled Boris Yeltsin's almost-insolvent government. As recently as April, Russia's 100 wealthiest citizens had a combined fortune equivalent to about a third of the economy, Forbes magazine estimated.

The nation's 25 wealthiest businessmen have seen their worth shrink by $230 billion, or 62 percent, according to Bloomberg calculations. And Putin controls the strings on the biggest remaining purse -- $531 billion in government reserves, which he is doling out through state-run Vnesheconombank, or VEB, where he presides as chairman of the supervisory board.
...

Global Economy - Guest - 10-17-2008

Cash crunch hits India Inc hard

QUOTEPutin May Use Credit Crisis to Finish Reining in Oligarchs
Putin is trying to regain Russia power from behind. His hand is not involved in GLobal crisis.
Democrats, Soros, left Elites, international Hedge Funds are directly involved.

People are still buying 8-9 million dollar house and prices in Bay area is still high not even close to 2006 level. More correction is required.

Global Economy - Guest - 10-18-2008

Russia not yet ready to lend to IcelandQUOTEREYKJAVIK/MOSCOW (Reuters) - Russia is not yet convinced it should make a loan to Iceland to help dig it out of a financial crisis, a Russian source said on Friday.

At this stage, we don't know how many big countries are in big doo doo including USA, European Union, Russia and mysterious China.

Paulson invited seven top US Banks CEO, gave them one page memo and asked them to sign it.
European banks took money from their respective government and deposited in saving. They are not extending that money to public. Same US banks are doing. Yesterday Paulson forced them to extend credit.

Global Economy - acharya - 10-20-2008

QUOTEThe Guys From âGovernment Sachsâ

By JULIE CRESWELL and BEN WHITE
Published: October 17, 2008

THIS summer, when the Treasury secretary, Henry M. Paulson Jr., sought help navigating the Wall Street meltdown, he turned to his old firm, Goldman Sachs, snagging a handful of former bankers and other experts in corporate restructurings.

In September, after the government bailed out the American International Group, the faltering insurance giant, for $85 billion, Mr. Paulson helped select a director from Goldmanâs own board to lead A.I.G.

And earlier this month, when Mr. Paulson needed someone to oversee the governmentâs proposed $700 billion bailout fund, he again recruited someone with a Goldman pedigree, giving the post to a 35-year-old former investment banker who, before coming to the Treasury Department, had little background in housing finance.

Indeed, Goldmanâs presence in the department and around the federal response to the financial crisis is so ubiquitous that other bankers and competitors have given the star-studded firm a new nickname: Government Sachs.

The power and influence that Goldman wields at the nexus of politics and finance is no accident. Long regarded as the savviest and most admired firm among the ranks â now decimated â of Wall Street investment banks, it has a history and culture of encouraging its partners to take leadership roles in public service.

It is a widely held view within the bank that no matter how much money you pile up, you are not a true Goldman star until you make your mark in the political sphere. While Goldman sees this as little more than giving back to the financial world, outside executives and analysts wonder about potential conflicts of interest presented by the firmâs unique perch.

They note that decisions that Mr. Paulson and other Goldman alumni make at Treasury directly affect the firmâs own fortunes. They also question why Goldman, which with other firms may have helped fuel the financial crisis through the use of exotic securities, has such a strong hand in trying to resolve the problem.

The very scale of the financial calamity and the historic government response to it have spawned a host of other questions about Goldmanâs role.

Analysts wonder why Mr. Paulson hasnât hired more individuals from other banks to limit the appearance that the Treasury Department has become a de facto Goldman division. Others ask whose interests Mr. Paulson and his coterie of former Goldman executives have in mind: those overseeing tottering financial services firms, or average homeowners squeezed by the crisis?

Still others question whether Goldman alumni leading the federal bailout have the breadth and depth of experience needed to tackle financial problems of such complexity â and whether Mr. Paulson has cast his net widely enough to ensure that innovative responses are pursued.

âHeâs brought on people who have the same life experiences and ideologies as he does,â said William K. Black, an associate professor of law and economics at the University of Missouri and counsel to the Federal Home Loan Bank Board during the savings and loan crisis of the 1980s. âThese people were trained by Paulson, evaluated by Paulson so their mind-set is not just shaped in generalized group think â itâs specific Paulson group think.â

Not so fast, say Goldmanâs supporters. They vehemently dismiss suggestions that Mr. Paulsonâs team would elevate Goldmanâs interests above those of other banks, homeowners and taxpayers. Such chatter, they say, is a paranoid theory peddled, almost always anonymously, by less successful rivals. Just add black helicopters, they joke.

âThere is no conspiracy,â said Donald C. Langevoort, a law professor at Georgetown University. âClearly if time were not a problem, you would have a committee of independent people vetting all of the potential conflicts, responding to questions whether someone ought to be involved with a particular aspect or project or not because of relationships with a former firm â but those things do take time and canât be imposed in an emergency situation.â

In fact, Goldmanâs admirers say, the firmâs ranks should be praised, not criticized, for taking a leadership role in the crisis.

âThere are people at Goldman Sachs making no money, living at hotels, trying to save the financial world,â said Jes Staley, the head of JPMorgan Chaseâs asset management division. âTo indict Goldman Sachs for the people helping out Washington is wrong.â

Goldman concurs. âWeâre proud of our alumni, but frankly, when they work in the public sector, their presence is more of a negative than a positive for us in terms of winning business,â said Lucas Van Praag, a spokesman for Goldman. âThere is no mileage for them in giving Goldman Sachs the corporate equivalent of most-favored-nation status.â

MR. PAULSON himself landed atop Treasury because of a Goldman tie. Joshua B. Bolten, a former Goldman executive and President Bushâs chief of staff, helped recruit him to the post in 2006.

Some analysts say that given the pressures Mr. Paulson faced creating a SWAT team to address the financial crisis, it was only natural for him to turn to his former firm for a capable battery.

And if there is one thing Goldman has, it is an imposing army of top-of-their-class, up-before-dawn Ã¼ber-achievers. The most prominent former Goldman banker now working for Mr. Paulson at Treasury is also perhaps the most unlikely.

Joshua B. Bolten, top, a former Goldman executive, is President Bushâs chief of staff. Stephen Friedman, a former chairman of Goldman, is chairman of the New York Fed. This fall, as part of its bailout, the government put Edward M. Liddy, then a Goldman director, in charge of A.I.G.

Neel T. Kashkari arrived in Washington in 2006 after spending two years as a low-level technology investment banker for Goldman in San Francisco, where he advised start-up computer security companies. Before joining Goldman, Mr. Kashkari, who has two engineering degrees in addition to an M.B.A. from the Wharton School of the University of Pennsylvania, worked on satellite projects for TRW, the space company that now belongs to Northrop Grumman.

He was originally appointed to oversee a $700 billion fund that Mr. Paulson orchestrated to buy toxic and complex bank assets, but the role evolved as his boss decided to invest taxpayer money directly in troubled financial institutions.

Mr. Kashkari, who met Mr. Paulson only briefly before going to the Treasury Department, is also in charge of selecting the staff to run the bailout program. One of his early picks was Reuben Jeffrey, a former Goldman executive, to serve as interim chief investment officer.

Mr. Kashkari is considered highly intelligent and talented. He has also been Mr. Paulsonâs right-hand man â and constant public shadow â during the financial crisis.

He played a main role in the emergency sale of Bear Stearns to JPMorgan Chase in March, sitting in a Park Avenue conference room as details of the acquisition were hammered out. He often exited the room to funnel information to Mr. Paulson about the progress.

Despite Mr. Kashkariâs talents in deal-making, there are widespread questions about whether he has the experience or expertise to manage such a project.

âMr. Kashkari may be the most brilliant, talented person in the United States, but the optics of putting a 35-year-old Paulson protÃ©gÃ© in charge of what, at least at one point, was supposed to be the most important part of the recovery effort are just very damaging,â said Michael Greenberger, a University of Maryland law professor and a former senior official with the Commodity Futures Trading Commission.

âThe American people are fed up with Wall Street, and there are plenty of people around who could have been brought in here to offer broader judgment on these problems,â Mr. Greenberger added. âAll wisdom about financial matters does not reside on Wall Street.â

Mr. Kashkari wonât directly manage the bailout fund. More than 200 firms submitted bids to oversee pieces of the program, and Treasury has winnowed the list to fewer than 10 and could announce the results as early as this week. Goldman submitted a bid but offered to provide its services gratis.

While Mr. Kashkari is playing a prominent public role, other Goldman alumni dominate Mr. Paulsonâs inner sanctum.

The A-team includes Dan Jester, a former strategic officer for Goldman who has been involved in most of Treasuryâs recent initiatives, especially the government takeover of the mortgage giants Fannie Mae and Freddie Mac. Mr. Jester has also been central to the effort to inject capital into banks, a list that includes Goldman.

Another central player is Steve Shafran, who grew close to Mr. Paulson in the 1990s while working in Goldmanâs private equity business in Asia. Initially focused on student loan problems, Mr. Shafran quickly became involved in Treasuryâs initiative to guarantee money market funds, among other things.

Mr. Shafran, who retired from Goldman in 2000, had settled with his family in Ketchum, Idaho, where he joined the city council. Baird Gourlay, the council president, said he had spoken a couple of times with Mr. Shafran since he returned to Washington last year.

âHe was initially working on the student loan part of the problem,â Mr. Gourlay said. âBut as things started falling apart, he said Paulson was relying on him more and more.â

The Treasury Department said Mr. Shafran and the other former Goldman executives were unavailable for comment.

Other prominent former Goldman executives now at Treasury include Kendrick R. Wilson III, a seasoned adviser to chief executives of the nationâs biggest banks. Mr. Wilson, an unpaid adviser, mainly spends his time working his ample contact list of bank chiefs to apprise them of possible Treasury plans and gauge reaction.

Another Goldman veteran, Edward C. Forst, served briefly as an adviser to Mr. Paulson on setting up the bailout fund but has since left to return to his post as executive vice president of Harvard. Robert K. Steel, a former vice chairman at Goldman, was tapped to look at ways to shore up Fannie Mae and Freddie Mac. Mr. Steel left Treasury to become chief executive of Wachovia this summer before the government took over the entities.

Treasury officials acknowledge that former Goldman executives have played an enormous role in responding to the current crisis. But they also note that many other top Treasury Department officials with no ties to Goldman are doing significant work, often without notice. This group includes David G. Nason, a senior adviser to Mr. Paulson and a former Securities and Exchange Commission official.

Robert F. Hoyt, general counsel at Treasury, has also worked around the clock in recent weeks to make sure the departmentâs unprecedented moves pass legal muster. Michele Davis is a Capitol Hill veteran and Treasury policy director. None of them are Goldmanites.

âSecretary Paulson has a deep bench of seasoned financial policy experts with varied experience,â said Jennifer Zuccarelli, a spokeswoman for the Treasury. âBringing additional expertise to bear at times like these is clearly in the taxpayersâ and the U.S. economyâs best interests.â

While many Wall Streeters have made the trek to Washington, there is no question that the axis of power at the Treasury Department tilts toward Goldman. That has led some to assume that the interests of the bank, and Wall Street more broadly, are the first priority. There is also the question of whether the departmentâs actions benefit the personal finances of the former Goldman executives and their friends.

âTo the extent that they have a portfolio or blind trust that holds Goldman Sachs stock, they have conflicts,â said James K. Galbraith, a professor of government and business relations at the University of Texas. âTo the extent that they have ties and alumni loyalty or friendships with people that are still there, they have potential conflicts.â

Mr. Paulson, Mr. Kashkari and Mr. Shafran no longer own any Goldman shares. It is unclear whether Mr. Jester or Mr. Wilson does because, according to the Treasury Department, they were hired as contractors and are not required to disclose their financial holdings.

For every naysayer, meanwhile, there is also a Goldman defender who says the bankâs alumni are doing what they have done since the days when Sidney Weinberg ran the bank in the 1930s and urged his bankers to give generously to charities and volunteer for public service.

âI give Hank credit for attracting so many talented people. None of these guys need to do this,â said Barry Volpert, a managing director at Crestview Partners and a former co-chief operating officer of Goldmanâs private equity business. âTheyâre not getting paid. Theyâre killing themselves. They havenât seen their families for months. The idea that thereâs some sort of cabal or conflict here is nonsense.â

In fact, say some Goldman executives, the perception of a conflict of interest has actually cost them opportunities in the crisis. For instance, Goldman wasnât allowed to examine the books of Bear Stearns when regulators were orchestrating an emergency sale of the faltering investment bank.

THIS summer, as he fought for the survival of Lehman Brothers, Richard S. Fuld Jr., its chief executive, made a final plea to regulators to turn his investment bank into a bank holding company, which would allow it to receive constant access to federal funding.

Timothy F. Geithner, the president of the Federal Reserve Bank of New York, told him no, according to a former Lehman executive who requested anonymity because of continuing investigations of the firmâs demise. Its options exhausted, Lehman filed for bankruptcy in mid-September.

One week later, Goldman and Morgan Stanley were designated bank holding companies.

âThat was our idea three months ago, and they wouldnât let us do it,â said a former senior Lehman executive who requested anonymity because he was not authorized to comment publicly. âBut when Goldman got in trouble, they did it right away. No one could believe it.â

The New York Fed, which declined to comment, has become, after Treasury, the favorite target for Goldman conspiracy theorists. As the most powerful regional member of the Federal Reserve system, and based in the nationâs financial capital, it has been a driving force in efforts to shore up the flailing financial system.

Mr. Geithner, 47, played a pivotal role in the decision to let Lehman die and to bail out A.I.G. A 20-year public servant, he has never worked in the financial sector. Some analysts say that has left him reliant on Wall Street chiefs to guide his thinking and that Goldman alumni have figured prominently in his ascent.

After working at the New York consulting firm Kissinger Associates, Mr. Geithner landed at the Treasury Department in 1988, eventually catching the eye of Robert E. Rubin, Goldmanâs former co-chairman. Mr. Rubin, who became Treasury secretary in 1995, kept Mr. Geithner at his side through several international meltdowns, including the Russian credit crisis in the late 1990s.

Mr. Rubin, now senior counselor at Citigroup, declined to comment.

A few years later, in 2003, Mr. Geithner was named president of the New York Fed. Leading the search committee was Pete G. Peterson, the former head of Lehman Brothers and the senior chairman of the private equity firm Blackstone. Among those on an outside advisory committee were the former Fed chairman Paul A. Volcker; the former A.I.G. chief executive Maurice R. Greenberg; and John C. Whitehead, a former co-chairman of Goldman.

The board of the New York Fed is led by Stephen Friedman, a former chairman of Goldman. He is a âClass Câ director, meaning that he was appointed by the board to represent the public.

Mr. Friedman, who wears many hats, including that of chairman of the Presidentâs Foreign Intelligence Advisory Board, did not return calls for comment.

During his tenure, Mr. Geithner has turned to Goldman in filling important positions or to handle special projects. He hired a former Goldman economist, William C. Dudley, to oversee the New York Fed unit that buys and sells government securities. He also tapped E. Gerald Corrigan, a well-regarded Goldman managing director and former New York Fed president, to reconvene a group to analyze risk on Wall Street.

Some people say that all of these Goldman ties to the New York Fed are simply too close for comfort. âItâs grotesque,â said Christopher Whalen, a managing partner at Institutional Risk Analytics and a critic of the Fed. âAnd itâs done without apology.â

A person familiar with Mr. Geithnerâs thinking who was not authorized to speak publicly said that there was âno secret handshakeâ between the New York Fed and Goldman, describing such speculation as a conspiracy theory.

Furthermore, others say, it makes sense that Goldman would have a presence in organizations like the New York Fed.

âThis is a very small, close-knit world. The fact that all of the major financial services firms, investment banking firms are in New York City means that when work is to be done, youâre going to be dealing with one of these guys,â said Mr. Langevoort at Georgetown. âThe work of selecting the head of the New York Fed or a blue-ribbon commission â any of that sort of work â is going to involve a standard cast of characters.â

Being inside may not curry special favor anyway, some people note. Even though Mr. Fuld served on the board of the New York Fed, his proximity to federal power didnât spare Lehman from bankruptcy.

But when bankruptcy loomed for A.I.G. â a collapse regulators feared would take down the entire financial system â federal officials found themselves once again turning to someone who had a Goldman connection. Once the government decided to grant A.I.G., the largest insurance company, an $85 billion lifeline (which has since grown to about $122 billion) to prevent a collapse, regulators, including Mr. Paulson and Mr. Geithner, wanted new executive blood at the top.

They picked Edward M. Liddy, the former C.E.O. of the insurer Allstate. Mr. Liddy had been a Goldman director since 2003 â he resigned after taking the A.I.G. job â and was chairman of the audit committee. (Another former Goldman executive, Suzanne Nora Johnson, was named to the A.I.G. board this summer.)

Like many Wall Street firms, Goldman also had financial ties to A.I.G. It was the insurerâs largest trading partner, with exposure to $20 billion in credit derivatives, and could have faced losses had A.I.G. collapsed. Goldman has said repeatedly that its exposure to A.I.G. was âimmaterialâ and that the $20 billion was hedged so completely that it would have insulated the firm from significant losses.

As the financial crisis has taken on a more global cast in recent weeks, Mr. Paulson has sat across the table from former Goldman colleagues, including Robert B. Zoellick, now president of the World Bank; Mario Draghi, president of the international group of regulators called the Financial Stability Forum; and Mark J. Carney, the governor of the Bank of Canada.

BUT Mr. Paulsonâs home team is still what draws the most scrutiny.

âPaulson put Goldman people into these positions at Treasury because these are the people he knows and there are no constraints on him not to do so,â Mr. Whalen says. âThe appearance of conflict of interest is everywhere, and that used to be enough. However, weâve decided to dispense with the basic principles of checks and balances and our ethical standards in times of crisis.â

Ultimately, analysts say, the actions of Mr. Paulson and his alumni club may come under more study.

âI suspect the conduct of Goldman Sachs and other bankers in the rescue will be a background theme, if not a highlighted theme, as Congress decides how much regulation, how much control and frankly, how punitive to be with respect to the financial services industry,â said Mr. Langevoort at Georgetown. âThe settling up is going to come in Congress next spring.â

http://www.nytimes.com/2008/10/19/business...hs&st=cse&scp=1

Global Economy - Guest - 10-20-2008

China's Economy Grows 9%, Slowest Pace in Five YearsQUOTEOct. 20 (Bloomberg) -- China's economy grew 9 percent in the third quarter, the slowest pace in five years, underscoring concern that the spreading financial crisis threatens the biggest contributor to global growth.

The median estimate of 12 economists surveyed by Bloomberg News was for a 9.7 percent expansion, after a 10.1 percent gain in the previous three months. The statistics bureau released the data in Beijing today.

China may cut interest rates for the third time this year after weaker export orders and factory closures for the Olympic Games damped industrial output. The nation will raise investment in infrastructure and boost export-tax rebates to protect the economy from the increasing risks posed by the financial turmoil, the cabinet said yesterday.

``There are no options for the Chinese government except to stimulate the economy -- more monetary easing is needed,'' said Sherman Chan, an economist with Moody's Economy.com in Sydney. She predicts five rate cuts by mid-2009 and the abolition of quotas that limit banks' lending.

Inflation cooled to 4.6 percent in September from 4.9 percent in August.
.....

The CSI 300 Index of stocks has fallen 66 percent this year. 

``The panic in the stock market has spread to the property market,'' said Chan, of Moody's Economy.com. ``Declines in asset prices make people feel less wealthy and they will cut back on consumption and then investment growth will slow.''

...

The International Monetary Fund estimated this month that China's economy may expand 9.3 percent next year compared with growth of 0.1 percent in the U.S., 0.2 percent in the euro area, and 0.5 percent in Japan. China was the biggest contributor to global growth last year, according to the organization.

Global Economy - Guest - 10-20-2008

Oil rises to $73 on expectation of OPEC cutQUOTEKhelil, who is also Algeria's energy minister, said OPEC may cut output again at a meeting in December, and that the group considers the oil market oversupplied by about 2 million barrels a day, Khelil said.

Venezuelan President Hugo Chavez said Sunday he would like prices between $80 and $90 a barrel.

..........

"Oil demand in the U.S. will be a bellwether," Pervan said. "If the US, Europe and Japan go into a major recession, there's no reason we can't see $35, $40 a barrel."

Increasing oil price will speedup recession and price will go down but these greedy Oil producing nation just don't get it.