Entries in Financial Crisis (8)


Cyprus Church Offers Assistance in Financial Crisis

Simon Dawson/Bloomberg via Getty Images(NEW YORK) -- Politicians and financiers are scrambling to agree on a deal that would bail out Cyprus and its banks, which are badly in need of a $20 billion loan. Possible solutions include nationalizing pensions, selling a bank to Russia, or -- troubling to bank customers the world over -- taking money out of average Cypriot savers' bank accounts. But might they also have a more divine savior?

The head of Cyprus' Orthodox Church, Archbishop Chrysostomos II, has offered to mortgage the church's assets to help get Cyprus out of its financial hole. How much does it have? In an interview with ABC News, Chrysostomos said the church's land and hotels were worth somewhere in the billions.

Not enough to bail out Cyprus by itself, he admitted, but enough so that Cyprus doesn't have to grovel and live by stringent demands that come with European Union loans.

"The solution will come from within and we have to stand on our own two feet, without anyone's help," said the archbishop, wearing a simple blue cassock, in his office in central Nicosia. "If I don't help my country, my country will collapse. If the people suffer, the church will also suffer the same fate."

Chrysostomos and his aides declined to provide a list of what the church owns, but it is believed to be the country's largest landholder. Chrysostomos said he planned to mortgage the land as well as hotels as collateral. The church is also the largest shareholder of a Cypriot beer and a major shareholder in Hellenic Bank, but aides said those assets were publicly held and therefore not free for the church to mortgage on its own.

"We are going to give our whole fortune to the government," Chrysostomos said.

Chrysostomos praised Cypriot parliamentarians for rejecting a plan that would have taken money out of bank accounts in order to help pay for the loan. He did not mince words for the European financiers and politicians who drafted the deal, and argued Cyprus should be willing to leave the Eurozone.

"Cyprus is an equal member of the European Union. Unfortunately, all these leaders treated us unfairly," he said. "These minds that these European leaders have -- I believe they will destroy Europe by themselves. So I suggest we have to leave them before they destroy the European Union."

Chrysostomos has called for all Cypriots to sacrifice to help pay back the country's debts. He urged the president to create a national bond, and in the interview said he hoped the church was setting an example to the country's richest residents -- "so they will help also."

Chrysostomos spoke softly, surrounded by impressive art and a long table ringed by gold and wooden chairs. By the time he finished speaking to ABC News, a line of people waited outside his office. He said he believes the church holds considerable moral weight in Cyprus and that people will follow its lead in helping the government find a solution.

"Most of the people will support the government," he says. "They are going to listen to the voice of the church, which is the mother of all of us."

Copyright 2013 ABC News Radio


Six Ways to Profit from the US Debt Crisis

Medioimages/Photodisc(NEW YORK) -- The same crisis that gave grey hair to Congressmen is creating new profit opportunities for investors, say financial strategists.

Thanks to continuing U.S. debt woes, now may be the best time to get a fixed-rate, 30-year mortgage; or the best time to invest in the stocks of U.S. companies that export. It's a good time to bet against U.S. treasuries and to put money into currencies that are likely to outperform the dollar.

On Wednesday, the dollar fell on worries that credit rating agencies may yet downgrade U.S. debt, despite the debt-reduction bill passed by Congress and agreed to by the White House earlier this week. Two reports issued Wednesday—one on U.S. factory orders, the other on the U.S. service sector—gave more bad news, suggesting that already-anemic U.S. economic growth is slowing.

Yet this bleak economic news is creating investment opportunities in several categories:

Home Mortgages. The fact that the yield on 10-year U.S. Treasury notes has plunged is good news for anyone looking for an affordable a home loan, since mortgage rates and 10-year treasuries typically move in tandem.

U.S. Treasuries. Worried that treasuries will decline further? You can invest in a mutual fund that goes up when treasuries go down. These allow investors, in effect, to bet against U.S. debt.

Foreign Currencies. If the U.S. dollar continues to decline, Tom Lydon, editor and publisher of ETF Trends, suggests investors consider a fund pessimistic about U.S. currency. Example: The PowerShares DB US Dollar Bearish Fund, which rewards investors when the dollar weakens in relation to the Japanese yen, the British pound, the Canadian dollar, Swiss franc and Swedish krona. Alternatively, investors can simply buy those currencies directly.

Axel Merk, manager of the Merk Funds, which include the Merk Hard Currency Fund, thinks it makes more sense for an investor to buy a basket of currencies rather than the currency of any one country (Singapore, for example, whose strong economy and positive trade balance have made its dollar a star performer).

"Having a basket," he says, "mitigates the risk. We like the countries whose central banks are printing less money than the U.S. and whose governments are spending less." Merk's basket includes some of the currencies named above, plus the New Zealand dollar and the Australian dollar, as well as gold.

Copyright 2011 ABC News Radio


Geithner: Raise Debt Ceiling or Risk Another Financial Crisis

Lauren Victoria Burke/ABC NEWS(WASHINGTON) -- In testimony Tuesday before a Senate Appropriations panel, U.S. Treasury Secretary Timothy Geithner again emphasized to Congress that failure to raise the country’s debt limit would have “catastrophic” consequences and make the recent financial crisis appear “modest in comparison.”

“Default by the United States would precipitate a crisis worse than the one we just went through. I think it would make the crisis we went through look modest in comparison. It would force us of course to cut critical payments to our seniors and it would be a reckless, irresponsible act to this country. I find it inconceivable that the Congress would not act to increase the limit.”

The Treasury boss then said that if lawmakers do not raise the debt ceiling, it could cause a number of “inconceivable” consequences, such as a dramatic rise in unemployment.

“It would be catastrophic. I mean, if you call into question the willingness of the government of the United States to meet its obligations, you will shake the basic foundation of the entire global financial system. It is inconceivable that America would do that. And of course I am totally confident that Congress will act to avoid that,” Geithner said.

“It will raise dramatically the borrowing costs permanently for all Americans. Every business for a very long period time would face a much higher cost of borrowing. Every family would face a much higher cost of borrowing. Unemployment would rise dramatically. Thousands if not hundreds of thousands of businesses would fail. And of course you would shake the confidence of the world in U.S. financial assets and Treasuries. It would be a deeply irresponsible act, again inconceivable.”

Copyright 2011 ABC News Radio


Unions and Wall Street at the Oscars

Wally Pfister speaking after accepting the Academy Award for best cinematography on the film "Inception." Photo Courtesy - Getty Images(LOS ANGELES) -- The Academy Awards was mostly show business as usual following three weeks of union protests at Wisconsin's capital. Although the Hollywood film industry is brimming with dozens of unions, from the Screen Actors Guild and the Writers Guild of America to the American Federation of Radio and TV Artists, there were only a few shout-outs in support of collective bargaining, which the governor's budget proposes to limit.

The best cinematography winner, Wally Pfister, thanked his union crew for their work on Inception during his acceptance speech.

"I think that what is going on in Wisconsin is kind of madness right now," Pfister said. "I have been a union member for 30 years and what the union has given to me is security for my family. They have given me health care in a country that doesn't provide health care and I think unions are a very important part of the middle class in America -- all we are trying to do is get a decent wage and have medical care."

ABC News reports that Pfister expressed further shock at Gov. Scott Walker's budget proposal backstage after his speech.

Gary Rizzo, who won best sound mixing for Inception, thanked "all the hard-working boom operators and utility sound people that worked on the production crew. Union, of course."

There seemed to be only one declaration about the financial meltdown onstage. The director for best documentary, Charles Ferguson, was one of the only winners who mentioned the financial crisis. His film, Inside Job, depicted Wall Street in a harsh light while examining the origins of the financial crisis.

"Forgive me, I must start by pointing out that three years after our horrific financial crisis caused by financial fraud, not a single financial executive has gone to jail, and that's wrong," Ferguson said.

The website Bloginity reported Ferguson said during a backstage interview that the reason nothing has been done about these alleged financial crimes is that "the financial industry has become so politically powerful that it is able to inhibit the normal processes of justice and law enforcement."

Copyright 2011 ABC News Radio


Financial Crisis Was Avoidable, FCIC Report Says

Photo Courtesy - Getty Images(WASHINGTON) --The financial crisis was avoidable, and government regulators and financial corporations missed key warning signs which could have staved off the crisis. That's the conclusion from the first official government report on the cause of the financial crisis released by the Financial Crisis Inquiry Commission.  

“This financial crisis could have been avoided. Let us be clear.  This calamity was the result of human action, inaction and misjudgment, not of mother nature or computer models gone haywire,” chairman Phil Angelides said.  “The captains of finance and the public stewards of our financial system ignored warnings and importantly failed to question and understand and to manage the evolving risks in a financial system that is so essential to the well being of our country. Theirs was a big miss, not a stumble.”

The FCIC report comes six months after Congress implemented regulatory legislation to respond to the crisis before the commission was able to conclude their investigation. 

“I don’t think we chose to take our work and shape it for Dodd-Frank at all,” commissioner John Thompson said.  “Our task was to identify the causes of the financial crisis, not necessarily to fit our investigation into a piece of legislation that might have evolved, so it was more circumstance that legislation evolved during the same period of time that we were doing our investigation.”  

Commission members hope the report will act as a “guidepost” for future legislation.

The report assigns blame for the financial meltdown across the financial spectrum from government regulators to Wall Street executives who allowed risky behavior to occur.

The FCIC concluded the crisis stemmed from widespread failures in financial regulation; dramatic breakdowns in corporate governance and risk management; a government ill-prepared to handle the financial crisis; corporation’s adoptions of risky trading and borrowing practices; and a breach of accountability and ethics.

According to the report, government regulators and corporations missed key warning signs ranging from an influx in risky subprime lending and securitization and growth in financial firms’ trading activities to a steady rise in housing prices and the adoption of predatory lending practices.  The report points to the Federal Reserve’s inability to stem the toxic flow of mortgages as a prime example of a missed warning sign, arguing the Fed ignored its ability and responsibility to strengthen mortgage-lending standards.   

The 633-page report details the lead-up to the financial crisis, the boom and bust of the mortgage industry, the demise of major financial institutions, such as Bear Sterns, Lehman Brothers and AIG, and the aftermath of the crisis, which has left the economy struggling to recover from a severe recession.

The commission is obligated by Congress to refer any potential violations they discovered over the course of the investigation to the appropriate authorities, and Angelides said they did uphold this obligation and referred potential violations to the authorities.  He declined to comment on how many or what kinds of violations were uncovered.

Copyright 2011 ABC News Radio


Government Report: Financial Crisis was 'Avoidable'

Photo Courtesy - Getty Images(WASHINGTON)  – A report due out Thursday has concluded that the financial meltdown could have been avoided, reports The New York Times, which got an early look at the findings.

The congressional inquiry has concluded that the 2008 crisis was caused by a combination of failures in government regulation and overly risky behavior on Wall Street.

“The greatest tragedy would be to accept the refrain that no one could have seen this coming and thus nothing could have been done,” the Financial Crisis Inquiry Commission wrote. “If we accept this notion, it will happen again.”

Among those blamed in the report include Federal Reserve chairmen Alan Greenspan and Ben Bernanke, as well as the Bush administration for what the commission called an “inconsistent response” to the crisis.

The report is expected to be released Thursday in the form of a 576-page book based on 19 days of hearings and interviews from over 700 witnesses.
Copyright 2011 ABC News Radio


Federal Reserve Details Massive $3.3 Trillion in Crisis Lending

Photo Courtesy - Getty Images(WASHINGTON) -- The Federal Reserve, in an unprecedented move required by the Dodd-Frank financial reform legislation, provided details of which banks and firms took advantage of a series of lending programs during the financial crisis.
Details of some $3.3 trillion in loans were posted to the Federal Reserve’s website early Wednesday afternoon. The data covers 21,000 lending transactions in the programs from December 2007 to July 2010.
In the data, Fed watchers can see which firms accessed the programs and how much lending these firms accessed. As one might expect, big banks were some of the most prolific users of the Fed’s largesse. But dozens of “Main Street” companies like McDonald's, Verizon, Harley-Davidson and General Electric also accessed the Fed lending programs. Even large foreign banks took out Fed loans -- through their US subsidiaries.
“After years of stonewalling by the Fed, the American people are finally learning the incredible and jaw-dropping details of the Fed’s multi-trillion-dollar bailout of Wall Street and corporate America,” said Senator Bernie Sanders, I-Vt., in a post-release statement. “Perhaps most surprising is the huge sum that went to bail out foreign private banks and corporations. As a result of this disclosure, other members of Congress and I will be taking a very extensive look at all aspects of how the Federal Reserve functions.”

Copyright 2010 ABC News Radio


Ireland Seeks 100 Billion Euro Bailout

Image Courtesy - Getty Images(NEW YORK) -- Wall Street will be watching to see whether Ireland is successful in turning around its economy.  The nation has asked the European Union for as much as 100 billion euros -- the equivalent of nearly $137 billion in American money -- to bail it out of its fiscal emergency.

Ireland's economy is much smaller but its problems may be even more complicated than those of the U.S., at least in one area.  Because it is in the so-called "euro-zone," it has no currency of its own and cannot recapitalize its banks with new money as the U.S. did.

Economist Peter Morici at the University of Maryland said Sunday that if Ireland gets a bailout, it could give the U.S. stock market a lift by removing uncertainty.  Morici says the issue of sovereign debt is a problematic one for markets all over the world.  Morici says Spain and Portugal are the next trouble spots to watch.

Copyright 2010 ABC News Radio

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