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Morning News Roundup

Posted by Vriz on November 14th, 2008

The news coming from Europe is not good. Yesterday’s reports that Europe’s biggest economy, Germany, is in a recession were followed by the announcement that the 15 Euro Zone countries are officially in a recession, too. The recovery is not expected until the second half of 2009.

The mood for the upcoming G-20 Summit in Washington will be gloomy. The 20 countries whose leaders are gathering in D.C. today for a two-day series of meetings represent 90% of the world’s economy. The Summit was called by President Bush at the urging of the French President Nicolas Sarkozy and U.K. Prime Minister Gordon Brown to have a discussion of the causes and possible cures of the financial crisis.

The Europeans want a more international approach to market regulation with curbs on executive pay and hedge funds as well as greater cross-border supervision of banks. However, President Bush is not likely to support sweeping regulatory measures. The likely outcome of the meetings: a couple of nice meals at the White House. Tackling the problems might have to wait until the new U.S. President takes office.

Oh, Freddy! The mortgage giant Freddie Mac, seized by the government two months ago, asked the Treasury for another infusion of federal funds: $13.8 billion worth, after a record quarterly loss caused its net worth to fall below zero. The third-quarter Freddy Mac net loss widened to $25.3 billion after writing down tax assets and providing for bad mortgages and securities.

The Federal Deposit Insurance Corporation (FDIC) has come out with a plan to provide relief to homeowners, by offering financial incentives to mortgage companies that would agree to significantly lower the monthly payments that individual homeowners pay on their mortgages. The plan aims to prevent 1.5 million foreclosures. The problem with the plan is how to pay for it. Agency officials estimated the cost to the government at $24.4 billion. The Treasury Secretary Paulson has apparently shot down the idea to pay for it with the funds from the $700 billion bail-out. In other words, this too may have to wait until the new Sheriff is in town.

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