Download Update Credit Crisis Jan 09

yes no Was this document useful for you?
   Thank you for your participation!

* Your assessment is very important for improving the work of artificial intelligence, which forms the content of this project

Document related concepts

Financialization wikipedia, lookup

History of the Federal Reserve System wikipedia, lookup

Stock trader wikipedia, lookup

Global saving glut wikipedia, lookup

Interbank lending market wikipedia, lookup

Fractional-reserve banking wikipedia, lookup

Bernard Madoff wikipedia, lookup

Harry Markopolos wikipedia, lookup

Securities fraud wikipedia, lookup

Update on Credit Crisis:
Daryl Montgomery
January 8, 2009
Copyright 2009, All Rights Reserved
The Biggest Ponzi Scheme in History
• Bernie Madoff admits to $50 billion hedge fund fraud
on December 11, 2008.
• Firm claimed $700 million in capital (not there).
• Authorities originally stated fraud began in 1995, now
thought to be the 1970s.
• People duped include top business and financial
execs, European banks, Hollywood celebrities, and
• SEC officials investigated Madoff 8 times in 16 years.
They found nothing wrong. Were they bribed?
• Madoff’s firm is a market maker for 350 Nasdaq
stocks. He is the former chairman of Nasdaq.
Another Big Securities Fraud
• Marc Drier, head of 250-member New York
law firm arrested for investor fraud on Dec 8.
• Accused of forgery, selling fake financial
instruments, false financial statements.
• Hedge funds bought the fake notes.
• Drier’s legal associates have allegedly been
involved in even bigger frauds.
• Escrow funds controlled by Drier firm seem to
have been lost in bad hedge fund investments.
This Months Biggest Overseas Fraud
• Satyam Computer, India’s 4th largest software
company admits to major fraud.
• It inflated cash balances by more than $1
billion (not even Enron managed to do this).
• Company had been overstating profits for
several years (used fake cash to hide this).
• Stock lost 77% of its value on Jan 7th.
• Fidelity was major stock holder.
Last Month’s Bailouts
• Auto makers bailed out in U.S. until spring;
Auto sales year over year down 53% for
Chrysler, Ford down 32%, GM down 31%.
• GMAC (chairman was a Madoff investor)
becomes bank, gets Federal money.
• Jaguar (was owned by Ford) requests bail out in
• Infineon spin-off bailed out in Germany.
• Ireland bails out its major banks.
The Latest Economic News
• Retail Holiday Sales – worst in four decades.
• Employment – 3 state’s claim systems collapse
preventing claim filings (weekly reports number
can’t be trusted). Jobless report will be bad.
• PPI, CPI are approaching zero for 2008 because of
falling oil; don’t believe news claiming deflation.
• England lowers rates to 1.5% (lowest since 1694);
Japan 0.10%, Fed institutes ZIPR (Zero interest
rate policy, predicted at last meeting).
• Watch for 4th Q 2008 GDP later this month.
Adjusted Monetary Base (future inflation)Currency Plus Bank Reserves
Total Reserves –
Sum of Deposits that count for Reserve Requirements
Borrowed Reserves –
Historically, Lower Number Easier Credit
Non-Borrowed Reserves –
Total Reserves Minus Discount Window Borrowing