Wall Street tumbles amid global sell-off

Wall Street tumbled Monday, joining a selloff around the world as fears grew that the financial crisis will cascade through economies globally despite bailout efforts by the U.S. and other governments. The Dow Jones industrials skidded more than 300 points and fell below 10,000 for the first time in four years, while the credit markets remained under strain.
The markets have come to the sobering realization that the Bush administration’s $700 billion rescue plan won’t work quickly to unfreeze the credit markets, and that many banks are still having difficulty gaining access to cash. That’s caused investors to exit stocks and move money into the relative safety of government debt.

Over the weekend, governments across Europe rushed to prop up failing banks. The German government and financial industry agreed on a $68 billion bailout for commercial-property lender Hypo Real Estate Holding AG, while France’s BNP Paribas agreed to acquire a 75 percent stake in Fortis’s Belgium bank after a government rescue failed.

The governments of Germany, Ireland and Greece also said they would guarantee bank deposits.

The Federal Reserve also took fresh steps to help ease seized-up credit markets. The central bank said Monday it will begin paying interest on commercial banks’ reserves and will expand its loan program to squeezed banks.

Investors took a bleak view of the future, seeing no end to the crisis in the near term. But analysts were more optimistic.

“These programs are going to be effective I believe,” said Rob Lutts, chief investment officer at Cabot Money Management. “Shorter term we’re in a very challenging environment that’s going to take a while.”

In midmorning trading, the Dow Jones industrial average fell 362.55, or 3.51 percent, to 9,962.83, dropping below 10,000 for the first time since Oct. 29, 2004. At one point, the Dow was down more than 400.

Broader indexes also tumbled. The Standard & Poor’s 500 index shed 48.34, or 4.40 percent, to 1,050.89; and the Nasdaq composite index fell 92.23, or 4.74 percent, to 1,855.16. The Russell 2000 index of smaller companies dropped 28.05, or 4.53 percent, to 591.35.

In Asia, the Nikkei 225 closed 4.25 percent lower. Europe’s stock markets also declined, with the FTSE-100 down 3.24 percent, Germany’s DAX down 5.28 percent, and France’s CAC-40 down 5.60 percent.

The anxiety was again obvious in the credit markets. The yield on the three-month Treasury bill slipped to 0.38 percent from 0.50 percent late Friday. Demand for bills remains high because of their safety; investors are willing to take extremely low returns just to have their money in a secure place.

Investors also moved into longer-term Treasury bonds. The yield on the 10-year note fell to 3.52 percent from 3.60 percent late Friday.

Banks’ hesitation to lend to one another and to many businesses and individuals is the result of the bad mortgage debt that the financial rescue is supposed to sweep up. But it’s still unclear how quickly financial institutions will be able to hand that debt to the U.S. government and convince the markets they are healthy again.

There has been some hope that perhaps the Fed, in concert with other central banks, might cut interest rates to help stimulate the economy. With oil prices well off their midsummer highs and indicators pointing to a slower economy, the Fed’s worries about inflation are less than they had been, making it easier to justify a rate cut.

Oil prices fell to an eight-month low below $90 a barrel on speculation that the spreading financial crisis will exacerbate a global economic slowdown and further cut demand for crude oil. Light, sweet crude tumbled $3.82 to $90.06 a barrel on the New York Mercantile Exchange.

Investors might get some indication about a potential rate cut with several policymakers slated to speak this week. Dallas Fed President Richard Fisher and Chicago Fed President Charles Evans will speak on the U.S. economy on Monday. Federal Reserve Chairman Ben Bernanke is due to speak on Tuesday.

Frederick Dickson, chief market strategist at D.A. Davidson & Co., believes investors are eager for any signs about the well being of the economy.

“Wall Street at this point is shifting its attention from whether Congress was going to act on the emergency stabilization bill to the realization that the economy is slowing significantly faster than most analysts had expected,” he said. “The downturn has shifted from first gear to about third gear in about two weeks.”

In corporate news, ailing Hartford Financial Services Group Inc. received a $2.5 billion investment from European insurer Allianz. Hartford’s market value was halved last week on concerns it needed more capital to survive, but shares recovered $4.53, or 16.5 percent, to $31.93 on Monday.

EBay Inc. fell $1.14, or 6 percent, to $17.81 after announcing it will cut about 1,000 jobs, reducing its work force by 10 percent, to streamline the company. The online auction site expects restructuring charges of about $70 million to $80 million, mostly during the fourth quarter.

Wells Fargo & Co. said late Sunday its takeover agreement with Wachovia Corp. will go forward after a state appeals court blocked a lower court ruling that favored rival bidder Citigroup Inc. Wells Fargo said it will “continue working toward the completion of its firm, binding merger agreement” with Wachovia.

Shares of Wells Fargo rose 6 cents to $34.68, while Citi fell 64 cents, or 3.5 percent, to $17.78. Wachovia fell 18 cents, or 2.9 percent, to $6.03.

Eli Lilly & Co. said its board approved an acquisition of ImClone Systems Inc. for more than $6 billion. The deal, which also has been approved by ImClone’s board, will create one of the leading oncology franchises in the biopharmaceutical industry. Eli Lilly fell $1.53, or 3.7 percent, to $39.75, while ImClone surged $2.80, or 4.3 percent, to $67.75.

Joe Bel Bruno, AP

Fed makes billions available to battle crisis

The Federal Reserve and foreign central banks agreed to pump billions of dollars into the global financial system Monday to unlock tight lending that threatens to unhinge the U.S. economy.
The Fed said the action is intended to “expand significantly” the cash available to financial institutions in an effort to relieve to the worst credit crisis since the Great Depression. In taking the action, the Fed cited “continued strains” in the demand for short-term funding.

Central banks will continue to work closely and are prepared to take “appropriate steps as needed” to ease the crisis and get banks lending again, the Fed said.

Under one new step, the Fed will boost the amount of 84-day cash loans available to U.S. banks. The Fed is increasing the amount to $75 billion, up from the current $25 billion starting on Oct. 6. Banks bid on a slice of the loans at an auction.

That move will triple the supply of 84-day loans to $225 billion, from $75 billion, the Fed said.

Meanwhile, the Fed will continue to make $75 billion worth of shorter, 28-day loans available to banks.

All told, the total amount of cash loans — 84-day and 28-day — available to banks will double to $300 billion from $150 billion, the Fed said.

Moreover, the Fed will make a total of $620 billion available to other central banks, expanding ongoing currency “swap” arrangements with them where dollars are traded for their currencies. That’s up from $290 billion previously in such arrangements.

The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Swiss National Bank and the central banks of Denmark, Norway, Australia and Sweden are involved in those swap arrangements.

The move comes as the U.S. financial meltdown’s tendrils have ensnared banks in Britain, the Benelux and Germany.

By pledging to provide “a very large” cash infusion, the Fed hopes the actions will “reassure financial market participants.”

On Wall Street, though, stocks were still down sharply even after the Fed’s announcement. The Dow Jones industrials plunged more than 270 points in morning trading.

The Fed actions come as Congress and the Bush administration move ahead on a $700 billion financial bailout plan.

It aims at breaking through a dangerous credit clog that has threatened to freeze up the entire financial system and throw the economy into a recession. At the heart of the plan, the government would buy bad mortgages and other dodgy debts held by banks and other financial institutions. By getting those rotten assets off their books, financial institutions should be in a better position to raise capital and boost lending, supporters contend.

Jeannine Aversa, AP

House ethics launches investigation of Rangel

The House ethics committee said Wednesday it was establishing an investigative panel to determine whether Rep. Charles Rangel, the influential chairman of the Ways and Means Committee, had broken House rules as a result of several reported lapses in his personal affairs.

Rangel, D-N.Y., has urged the ethics committee to look into questions surrounding his finances while rejecting Republican demands that he step down as head of the tax-writing committee.

House Republican leader John Boehner, R-Ohio, welcomed the investigation and renewed his call for Rangel to vacate his chairmanship. “During this time of economic crisis, it is not in our nation’s best interest to have the chairman of the House’s powerful tax-writing committee under investigation for unethical conduct related to his failure to comply with tax laws.”

Rangel, 78, last week wrote six checks for back taxes totaling $10,800 while stressing in a letter to New Yorkers that he had done nothing dishonorable and was the target of a GOP “guerrilla war.”

Rangel has been hit by a series of embarrassing revelations — that he didn’t pay taxes on rental income for a beach house in the Dominican Republic; that he used three rent-stabilized apartments in Harlem, including one for a campaign office; and that he used his congressional stationery to seek private donations to a college center named after him.

Heading the four-man investigative subcommittee will be acting ethics committee chairman Rep. Gene Green, D-Texas, and the top Republican on the ethics committee, Rep. Doc Hastings, R-Wash.

JIM ABRAMS (AP)

Poll: Racial misgivings of whites an Obama issue: One-third of white Democrats harbor negative views toward blacks

Deep-seated racial misgivings could cost Barack Obama the White House if the election is close, according to an AP-Yahoo News poll that found one-third of white Democrats harbor negative views toward blacks—many calling them “lazy,” “violent” or responsible for their own troubles.

The poll, conducted with Stanford University, suggests that the percentage of voters who may turn away from Obama because of his race could easily be larger than the final difference between the candidates in 2004—about 2.5 percentage points.

Certainly, Republican John McCain has his own obstacles: He’s an ally of an unpopular president and would be the nation’s oldest first-term president. But Obama faces this: 40 percent of all white Americans hold at least a partly negative view toward blacks, and that includes many Democrats and independents.

More than a third of all white Democrats and independents—voters Obama can’t win the White House without—agreed with at least one negative adjective about blacks, according to the survey, and they are significantly less likely to vote for Obama than those who don’t have such views.

Such numbers are a harsh dose of reality in a campaign for the history books. Obama, the first black candidate with a serious shot at the presidency, accepted the Democratic nomination on the 45th anniversary of Martin Luther King Jr.’s “I Have a Dream” speech, a seminal moment for a nation that enshrined slavery in its Constitution.

“There are a lot fewer bigots than there were 50 years ago, but that doesn’t mean there’s only a few bigots,” said Stanford political scientist Paul Sniderman who helped analyze the exhaustive survey.

The pollsters set out to determine why Obama is locked in a close race with McCain even as the political landscape seems to favor Democrats. President Bush’s unpopularity, the Iraq war and a national sense of economic hard times cut against GOP candidates, as does that fact that Democratic voters outnumber Republicans.

The findings suggest that Obama’s problem is close to home—among his fellow Democrats, particularly non-Hispanic white voters. Just seven in 10 people who call themselves Democrats support Obama, compared to the 85 percent of self-identified Republicans who back McCain.

The survey also focused on the racial attitudes of independent voters because they are likely to decide the election.

Lots of Republicans harbor prejudices, too, but the survey found they weren’t voting against Obama because of his race. Most Republicans wouldn’t vote for any Democrat for president—white, black or brown.

Not all whites are prejudiced. Indeed, more whites say good things about blacks than say bad things, the poll shows. And many whites who see blacks in a negative light are still willing or even eager to vote for Obama.

On the other side of the racial question, the Illinois Democrat is drawing almost unanimous support from blacks, the poll shows, though that probably wouldn’t be enough to counter the negative effect of some whites’ views.

Race is not the biggest factor driving Democrats and independents away from Obama. Doubts about his competency loom even larger, the poll indicates. More than a quarter of all Democrats expressed doubt that Obama can bring about the change they want, and they are likely to vote against him because of that.

Three in 10 of those Democrats who don’t trust Obama’s change-making credentials say they plan to vote for McCain.

Still, the effects of whites’ racial views are apparent in the polling.

Statistical models derived from the poll suggest that Obama’s support would be as much as 6 percentage points higher if there were no white racial prejudice.

But in an election without precedent, it’s hard to know if such models take into account all the possible factors at play.

The AP-Yahoo poll used the unique methodology of Knowledge Networks, a Menlo Park, Calif., firm that interviews people online after randomly selecting and screening them over telephone. Numerous studies have shown that people are more likely to report embarrassing behavior and unpopular opinions when answering questions on a computer rather than talking to a stranger.

Other techniques used in the poll included recording people’s responses to black or white faces flashed on a computer screen, asking participants to rate how well certain adjectives apply to blacks, measuring whether people believe blacks’ troubles are their own fault, and simply asking people how much they like or dislike blacks.

“We still don’t like black people,” said John Clouse, 57, reflecting the sentiments of his pals gathered at a coffee shop in Somerset, Ohio.

Given a choice of several positive and negative adjectives that might describe blacks, 20 percent of all whites said the word “violent” strongly applied. Among other words, 22 percent agreed with “boastful,” 29 percent “complaining,” 13 percent “lazy” and 11 percent “irresponsible.” When asked about positive adjectives, whites were more likely to stay on the fence than give a strongly positive assessment.

Among white Democrats, one-third cited a negative adjective and, of those, 58 percent said they planned to back Obama.

The poll sought to measure latent prejudices among whites by asking about factors contributing to the state of black America. One finding: More than a quarter of white Democrats agree that “if blacks would only try harder, they could be just as well off as whites.”

Those who agreed with that statement were much less likely to back Obama than those who didn’t.

Among white independents, racial stereotyping is not uncommon. For example, while about 20 percent of independent voters called blacks “intelligent” or “smart,” more than one third latched on the adjective “complaining” and 24 percent said blacks were “violent.”

Nearly four in 10 white independents agreed that blacks would be better off if they “try harder.”

The survey broke ground by incorporating images of black and white faces to measure implicit racial attitudes, or prejudices that are so deeply rooted that people may not realize they have them. That test suggested the incidence of racial prejudice is even higher, with more than half of whites revealing more negative feelings toward blacks than whites.

Researchers used mathematical modeling to sort out the relative impact of a huge swath of variables that might have an impact on people’s votes—including race, ideology, party identification, the hunger for change and the sentiments of Sen. Hillary Rodham Clinton’s backers.

Just 59 percent of her white Democratic supporters said they wanted Obama to be president. Nearly 17 percent of Clinton’s white backers plan to vote for McCain.

Among white Democrats, Clinton supporters were nearly twice as likely as Obama backers to say at least one negative adjective described blacks well, a finding that suggests many of her supporters in the primaries—particularly whites with high school education or less—were motivated in part by racial attitudes.

The survey of 2,227 adults was conducted Aug. 27 to Sept. 5. It has a margin of sampling error of plus or minus 2.1 percentage points.

RON FOURNIER and TREVOR TOMPSON (AP)

Ode to the Financial Industry CEO

Kush Jenkins, BlackPoliticsontheWeb.com Columnist

- America woke up today to a new world. We now spell Merrill Lynch; B-a-n-k o-f A-m-e-r-i-ca. Lehman Brothers is no longer in business. Fannie Mae and Freddie Mac can now be called Fannie Mae Federal and Freddie Mac Federal. And the list goes on. At such a day like this, I would like to rerun my Ode to the Financial Industry CEO. Enjoy.

How do you do it?

How do you wake up in the morning, knowing you are the CEO of a paper company? How do you confidently wish your dedicated secretary a good morning knowing she will be in the unemployment line next week?

How do you tell your staff to not worry knowing they will be unable to make their mortgage payment next month?

How do you proudly tell your employees that their retirement funds are sound, knowing it is nonexistent?

How do you aggressively reassure stockholders to continue investing their child’s college fund into your company knowing you will soon destroy their dreams of sending their child to college?

How do you make new commitments to nonprofit organizations on behalf of your company, knowing that they will never see a dime from your commitment?

How do you go on television and tout the soundness of your company’s financial position knowing the company is soundly bankrupt?

How do you sign off on company financial statements proclaiming their accuracy, knowing their inherent inaccuracy should call for prison sentences for the authors?

How do you herald yourself as the backbone of capitalism, knowing you will depend on social programs backed by taxpayer money to bail your company out?

How do you call yourself standing for America, knowing you will be destroying the lives of thousands of Americans?

How do you read this ode, knowing these questions should be answered by you?

My prayers go out to the American families being affected in this crisis.

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