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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: yard_man who wrote (86218)	9/13/2007 10:52:11 AM
From: ggamer	Read Replies (2) \| Respond to of 110194

This winter is not going to be fun! How many of you see a huge stock markt correction of at least 25% in the horizon? As you can see all the big guys are warming up to it. ECB, Paulson see growth threat Thursday September 13, 10:32 am ET By Mike Peacock LONDON (Reuters) - A global credit crisis has increased the threat to growth, the European Central Bank said on Thursday, as G7 governments asked for a report on the genesis of the turmoil for next month's meeting of finance chiefs. ADVERTISEMENT Treasury Secretary Henry Paulson said the U.S. economy would be hurt by the upheaval but the overall outlook remained benign. "There will be a penalty but the backdrop of the strength of the economy, the corporations, the institutions, is such that we are resilient," Paulson told London's Times newspaper. The ECB's monthly bulletin said global economic activity remained robust, supported mainly by buoyant emerging economies. But it added: "While the global repercussions of the U.S. economic slowdown have so far been limited, it remains to be seen whether the recent financial market turmoil will lead to a lasting reappraisal of global financial market risks and a loss in confidence with possible implications for the real economy." The Swiss National Bank raised interest rates by 25 basis points as inflation risks from a booming economy persisted but said the outlook had grown murkier. "Due to the international credit crisis, assessment of the economic situation and inflation prospects has become less certain," the central bank said. Governments from the Group of Seven top economies will ask the G7's financial stability watchdog to give a detailed report on the root causes of the credit crunch to its October meeting of finance ministers, U.S. Treasury officials said. Writing in the Financial Times, U.S. Treasury undersecretary for international affairs David McCormick and undersecretary for domestic finance, Robert Steel, said Washington would work with G7 counterparts to "determine appropriate actions." The G7's Financial Stability Forum -- a group of finance ministers, central bankers and regulators -- will examine financial institutions' liquidity, credit risk practices, accounting and valuation procedures for complex derivatives, supervisory principles and the role of credit rating agencies. ECB governing council member Erkki Liikanen said it would take months not weeks for financial markets to return to normal after a liquidity crunch, caused by banks' reluctance to lend to each other because of uncertainty over which may be hammered by losses in the teetering U.S. mortgage market. Central banks have poured cash into money markets over the past month to ease the liquidity squeeze but have stressed they are not riding to the rescue of risky investments. "Investors will not be bailed out because of their bad decisions," Liikanen said. The Bank of England on Thursday made its biggest concession yet to banks caught up in the credit crisis, giving them more leeway to borrow without penalty to manage daily cashflow, a move designed to lower elevated overnight lending rates and restore more normal trading conditions to the money markets. In a sign that tight money markets could hit consumer spending, Britain's two largest mortgage lender, Halifax and Abbey, said they were increasing some of their mortgage rates because of the credit crunch. BIG WEEK LOOMS The Federal Reserve is expected to cuts its fed funds rate by as much as 50 basis point next week to help relieve economic pressures, stemming from mass defaults on U.S. "subprime" mortgages granted mainly to poor people. That is only one of a host of factors which will go a long way to determining the depth of the crisis. An estimated $113 billion of euro commercial paper (ECP) is expected to mature by Tuesday and will need to be refinanced. And the U.S. corporate reporting season is beginning, giving an insight to banks' exposure to the subprime trauma. Wall Street investment banks Lehman Brothers (NYSE:LEH - News), Morgan Stanley (NYSE:MS - News), Goldman Sachs (NYSE:GS - News) and Bear Stearns (NYSE:BSC - News) all report their third-quarter results next week. A rapid shrinkage in the U.S. commercial paper market slowed in the latest week, a possible sign that trouble in this part of the credit world could be abating, Federal Reserve data showed. But Countrywide Financial Corp (NYSE:CFC - News), the largest U.S. mortgage lender, said its mortgage fundings slid 17 percent in August from a year earlier to $34 billion, on the housing slowdown and credit tightening in the mortgage market. ECB Governing Council member Yves Mersch said it was "absolutely premature on the basis of our knowledge" to predict the longer-term impact of the credit crisis. Australia's central bank pumped extra cash into the banking system to keep up a battle against high short-term money market rates, while caution over volatile financial markets prompted New Zealand's central bank to hold its official rates steady.