Stress Tests Show Big Banks Will Need to Raise Billions More

Some of the nation's largest banks will need to raise billions of dollars in additional capital after results of the government stress tests are released late Thursday.

The tests, which will be made public at 5 pm ET, were designed to gauge whether any of the nation's 19 largest banks would need more capital to survive a deeper recession.

Much of the results already began leaking out on Wednesday. Financial stocks initially rallied after the early results didn't appear to be as bad as investors feared. But the rally lost steam on Thursday even after Fed Chairman Ben Bernanke's comments that the stress tests should restore investor confidence in the banks.

Wells Fargo, Citigroup and Bank of America all need billions more, regulators have told them.

Citigroup will need to raise about $5 billion, according to a government official briefed on the results who spoke to the AP on the condition of anonymity because he was not authorized to discuss the matter. Earlier news reports had put that dollar figure closer to $10 billion.

Regions Financial will also need to raise more money, according to people briefed on the results, as will Bank of America and Wells Fargo.

Bank of America stock rose Wednesday after reports that the Charlotte, N.C.-based company would need to collect $34 billion in additional capital. The New York Times and Wall Street Journal reported the figure.

Wells Fargo needs between $13 billion and $15 billion, according to Times and Journal reports Thursday.

GMAC, the lending arm of beleaguered automaker General Motors, is said to need $11.5 billion.

Morgan Stanley is looking at between a $1 billion and $2 billion shortfall, according to the Times.

In all, the Journal said at least seven of the banks will need a combined $65 billion. The entire group that is deemed to need more capital will require less than $100 billion combined, according to the Times.

Despite being included in the Journal's tally, State Street is not being required to raise more capital after completing its stress test, a person familiar with the matter said Thursday.

The public nature of the assessments and Thursday's planned announcement raised questions among some critics about whether the findings will reflect the banks' actual conditions.

The tests put banks through two scenarios: one that reflected expectations about the current recession and another that envisioned a recession deeper than what analysts predict.

Stress tests have long been a part of the bank regulation system. They help regulators decide how to supervise banks and aid banks in deciding how to limit their risk. But those conversations between banks and regulators normally take place behind closed doors.

In recent weeks, the government's unprecedented decision to publicly release bank-test results has fanned speculation, with analysts predicting the findings and investors staking out trading positions.

Critics are concerned that all the attention could make the tests much less effective.

They say regulators seem so intent on maintaining public confidence in the banks that the results will have to say the banks are basically healthy. Officials have said they will not let any of the 19 institutions fold.

That makes it almost impossible for them to say anything about a bank that would threaten its survival, since a flight by investors could force the government to step in with additional bailout money—something the Treasury Department hopes to avoid.

"There is a real question as to the legitimacy of these results," said Jason O'Donnell, senior analyst at Boenning & Scattergood.

The stress tests are a key part of the Obama administration's plan to stabilize the financial industry. The tests estimated how much value the banks' loans would lose as consumers and businesses faced more trouble repaying loans.

The first test scenario envisioned unemployment reaching 8.8 percent in 2010 and housing prices dropping another 14 percent this year. The second imagined unemployment rising to 10.3 percent next year and homes losing another 22 percent of their value this year.

But economic assumptions have changed since the tests were designed in February.

Unemployment already has surpassed the 8.4 percent the test's first scenario predicts for 2009, which leaves some analysts wondering whether the tests were harsh enough.

The government is asking banks to keep their capital reserve ratios above a certain level so they can continue lending even if the economic picture darkens.

The banks that need more capital will have until June 8 to come up with a plan to raise the additional resources and have the plan approved by their regulators, officials said Wednesday.

Banks will have several options for increasing their capital. Some will be able to close the gap by converting the government's debt into common stock. Others will have six months to attempt to raise money from private investors.

If they cannot do it, the government will provide money from its $700 billion financial system bailout.

Representatives for American Express, JPMorgan Chase, Bank of New York Mellon, Citigroup and Regions Financial would not comment on the tests.

The remaining stress-tested banks are: Goldman Sachs Group, MetLife, PNC Financial Services Group, U.S. Bancorp, SunTrust Banks, Capital One Financial, BB&T, Regions Financial, Fifth Third Bancorp and Keycorp.

ECB Cuts Rate, To Start Assets Purchase: Trichet

The ECB lowered its key refi rate by a quarter percentage point to 1 percent but kept the overnight deposit rate, which is acting as a floor for money markets, at 0.25 percent, narrowing the gap between its policy rates instead of cutting the lowest of these to zero.

"The Euro System ... will purchase euro denominated covered bonds," Trichet told a news conference after its monetary policy decision.

"We expect to engage in a program which would be around 60 billion euros ($79.8 billion)," he said.

"In recognition of the central role played by the banking system in financing the euro area economy we will conduct liquidity providing longer term refinancing operations with a maturity of 12 months. The operations will be conducted at fixed rate tender procedures with full allotment," Trichet added.

He said the current interest rates of the ECB were appropriate.

The euro fell briefly against the dollar after his remarks but rebounded sharply after Trichet said an exit strategy from the policy of buying assets was needed.

Covered bonds — debt instruments secured by a cover pool of mortgage loans or public-sector debt — were considered as one segment of private securities that has been particularly touched by the financial turbulence, and needed boosting, he said.

"Around 60 billion euros is only an order of magnitude, it looks like an appropriate level for what we try to do, help revive this segment," Trichet said, but added: "sterilization, an exit strategy are absolutely essential in our view."

"These decisions have been taken to promote the ongoing decline in money market term rates, to encourage banks to maintain and expand their lending to clients, to help to improve market liquidity in important segments of the private debt security market, and to ease funding conditions for banks and enterprises," he said.

"We will display in our communication of our next meeting all the technicalities that goes with this purchase of covered bonds, which is something that is highly technical."

The decision to purchase assets does not necessarily mean the interest rate has found a floor, he said.

"We have not decided today that the new level of our policy rates was the lowest level, that we could never cross whatever future circumstances would be," Trichet said.

The ECB has cut rates from 4.25 percent since last October. Trichet said the euro zone was showing tentative signs of stabilising at a very low level after a weaker than expected first quarter.

BoE increases QE program, leaves rates on hold

LONDON (Reuters) - The Bank of England said on Thursday it would increase the size of its asset purchase program by 50 billion pounds to 125 billion pounds, and left interest rates at a record low 0.5 percent for a second month.

The central bank has already bought more than 50 billion pounds of assets, mainly government bonds, to boost the recession-bound British economy. It had been on track to complete the original program of quantitative easing by early June at the latest.

The pound fell and gilt futures rallied strongly after Thursday's announcement, halving earlier losses as the decision calmed nerves that the Bank might have suspended the program at the end of this month.

"There's no surprise that Bank Rate was held at 0.5 percent; however we are a little taken aback by the decision to increase the quantitative easing target by 50 billion pounds," said economist Philip Shaw at Investec.

"We had thought it more likely the Monetary Policy Committee would sit and wait to assess the impact of the existing program rather than expand it right away."

The central bank has cut interest rates by a total of 4.5 percentage points since October as Britain's economy plunged into its first recession since the early 1990s.

The Bank said on Thursday it would take a further three months to complete the program and that its scale would be kept under review.


STIMULUS MEASURES

Stimulus measures taken to revive a recession-hit economy would work, but it was not clear how quickly the upturn would come, the Bank said in a statement. It said it expected inflation to fall below its two percent target later this year, having stood at 2.9 percent in March.

"That stimulus should in due course lead to a recovery in economic growth, bringing inflation back toward the 2 percent target. But the timing and strength of that recovery is highly uncertain," the Bank said.

Britain's economy shrank at its fastest pace since 1979 in the first three months of this year, and looks set to record its worst full-year performance since World War Two.

However, recent surveys suggest the pace of decline is slowing. Consumer confidence has picked up markedly over the past two months, equity prices have jumped by a fifth and money market strains appear to be easing.

Asian Summary on 27032009

Stocks mixed, off their early peaks, but overall it was a more encouraging week for equities; auto and tech stocks rose, plus there was some further quarter and fiscal year-end buying noted. Nikkei off just 0.1%, Kospi off 0.5%, Taiwan +0.1%, Aussie shares +0.7%, Shanghai Composite +0.7%, HSI off 0.5%, STI down 0.9%.

FX majors fairly well behaved with some JPY-buying related to end-year repatriation; USD/JPY at 98.14 late, EUR/JPY at 133.36, EUR/USD 1.3585.

Japan Feb core CPI flat Y/Y vs 0.1% fall tipped, overall CPI down 0.1% Y/Y, down 0.3% M/M; Tokyo area March core CPI +0.4% Y/Y, as tipped, overall CPI +0.2% Y/Y, +0.3% M/M. Feb Japan retail sales down 5.8% Y/Y, sharpest fall since February 2002. Korea revised 4Q GDP showed 5.1% fall Q/Q vs 5.6% drop initially, 3.4% contraction Y/Y, same as first forecast. NZD ticked higher on data there: NZ 4Q GDP down 0.9% Q/Q vs revised 0.5% contraction in 3Q, biggest quarterly decline since September 1992, though slightly less than 1.0% contraction tipped; GDP down 1.9% Y/Y, in line with forecasts. February trade surplus NZ$489 million vs revised deficit of NZ$104 million in January, NZ$173 million gap tipped; mostly due to biggest slump in imports in 16 years. PBOC put out yet another essay which criticized the U.S. in runup to G20 meeting, focusing on what it deemed an insufficient financial regulatory system. Vietnam 2008 GDP grew 6.18%, vs 6.23% earlier estimate, with government tipping GDP +4.8%-5.6% this year, after estimating growth of 3.1% on-year in 1Q. May Nymex crude off 67 cents.(RXM)


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(END) Dow Jones Newswires

March 27, 2009 02:17 ET (06:17 GMT)

Asian Summary on 27032009

Stocks mixed, off their early peaks, but overall it was a more encouraging week for equities; auto and tech stocks rose, plus there was some further quarter and fiscal year-end buying noted. Nikkei off just 0.1%, Kospi off 0.5%, Taiwan +0.1%, Aussie shares +0.7%, Shanghai Composite +0.7%, HSI off 0.5%, STI down 0.9%.

FX majors fairly well behaved with some JPY-buying related to end-year repatriation; USD/JPY at 98.14 late, EUR/JPY at 133.36, EUR/USD 1.3585.

Japan Feb core CPI flat Y/Y vs 0.1% fall tipped, overall CPI down 0.1% Y/Y, down 0.3% M/M; Tokyo area March core CPI +0.4% Y/Y, as tipped, overall CPI +0.2% Y/Y, +0.3% M/M. Feb Japan retail sales down 5.8% Y/Y, sharpest fall since February 2002. Korea revised 4Q GDP showed 5.1% fall Q/Q vs 5.6% drop initially, 3.4% contraction Y/Y, same as first forecast. NZD ticked higher on data there: NZ 4Q GDP down 0.9% Q/Q vs revised 0.5% contraction in 3Q, biggest quarterly decline since September 1992, though slightly less than 1.0% contraction tipped; GDP down 1.9% Y/Y, in line with forecasts. February trade surplus NZ$489 million vs revised deficit of NZ$104 million in January, NZ$173 million gap tipped; mostly due to biggest slump in imports in 16 years. PBOC put out yet another essay which criticized the U.S. in runup to G20 meeting, focusing on what it deemed an insufficient financial regulatory system. Vietnam 2008 GDP grew 6.18%, vs 6.23% earlier estimate, with government tipping GDP +4.8%-5.6% this year, after estimating growth of 3.1% on-year in 1Q. May Nymex crude off 67 cents.(RXM)


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MarketTalk@dowjones.com

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(END) Dow Jones Newswires

March 27, 2009 02:17 ET (06:17 GMT)

Germany's Merkel Says NATO Must Succeed In Afghanistan

BERLIN (AFP)--German Chancellor Angela Merkel said Thursday that the North
Atlantic Treaty Organization must succeed in Afghanistan to ensure that the
country does not become a base again for "terrorists" to attack the alliance's
members.

"Afghanistan is NATO's biggest test at present," Merkel said in a speech to
parliament ahead of the alliance's 60th anniversary summit in Strasbourg,
France and the German towns of Baden-Baden and Kehl on April 3-4.

"For me our aim remains clear, against which our success will be measured,
that Afghanistan no longer poses a terrorist threat to our security, in other
words in NATO member countries. That is our aim," Merkel said.

"We should remember that Afghanistan ... was the base for the attacks of
September 11, 2001. This was possible because there was no functioning state,
and that was the reason for our engagement in Afghanistan, because it
threatened our security, the members of NATO."

Germany has about 3,500 troops in Afghanistan, one of 41 nations forming the
60,000-strong NATO-led International Security Assistance Force. The German
parliament voted last year to increase this to 4,500. The U.S. also has a
further 10,000 soldiers there not under NATO command.

Next week's summit is expected to see Barack Obama in his first visit to
Europe since becoming U.S. President in January press allies in the alliance,
Germany included, to do more in Afghanistan.

Germany's troops are based in the relatively peaceful north of Afghanistan -
14 of its soldiers have been killed there in attacks - but Merkel reiterated
that her country is pulling its weight in terms of police support and civilian
reconstruction work.

"We can be satisfied with our performance," she said.

She also welcomed Obama's moves to develop a joined-up strategy for both
Afghanistan and Pakistan, but stressed that there can be no talks with those
"not interested in reconstruction."

WORLD FOREX: Dlr Rises, Euro Mixed As Risk Appetite Improves

The dollar is mostly higher in Europe Thursday as risk
appetite improves a little and concerns about U.S. Treasury policy towards the
currency subside.

The rise in risk appetite was illustrated in a rally by the euro against the
yen, with equity markets showing some further strength.

Market sentiment was helped by data Wednesday showing that both U.S. durable
goods orders and new home orders had risen sharply, instead of continuing
their recent decline as the market had expected.

The fresh hope of economic recovery this injected into markets helped to lift
the Dow Jones Industrial Average 1.5% and then the Nikkei Index in Japan 1.9%.

However, there was some sign this sentiment was faltering, with most European
bourses starting their trading slightly in the red Thursday.

Underlying these moves is the continued debate on just what U.S. Treasury
Secretary Tim Geithner hoped to achieve by saying Wednesday he was "quite open"
to Chinese suggestions of a move towards Special Drawing Right-linked currency
reserves.

The U.S. official quickly back-tracked, stating the dollar will remain the
global reserve currency for some time to come, and helped the dollar to recover
sharp losses it made on the original statement.

See chart at

http://www.dowjoneswebservices.com/chart/view/1777

However, analysts said the episode illustrated just how fragile dollar
sentiment remains to any suggestion foreign countries are in any way
considering reducing their dollar-denominated reserves.

An SDR-linked currency is likely to hold a much higher percentage of euros,
yen and sterling, rather than dollars.

The euro, meanwhile, was having a mixed day, helped by higher risk appetite
but hurt by news that German consumer confidence declined for the first time
since September 2008.

Although sterling had been doing well at the start, the release of data
showing a 1.9% drop in U.K. retail sales last month pushed it lower.

By 1020 GMT, the dollar had pushed ahead to Y98.16 from Y97.30 late Wednesday
in New York, according to EBS.

The euro was down at $1.3567 from $1.3587, but rose to Y133.24 from Y132.19.

The pound was up at $1.4567 from $1.4531, but it had been as high as $1.4633.

The dollar rose to CHF1.1263 from CHF1.1203, while the euro rose to CHF1.5285
from CHF1.5222. For the second day in a row, the euro has been pushed down
close to CHF1.5200 to see if this will trigger intervention by the Swiss
National Bank.

The Swiss central bank launched a surprise intervention exercise March 12
when the euro fell as far as CHF1.4800.

In Eastern Europe, the Hungarian forint was staging a technical bounce, with
the euro falling to HUF301.89 from HUF302.41.

The euro was also down at PLN4.5541 from PLN4.5819, but up a little at
CZK27.515 from CZK27.413.

-By Nicholas Hastings, Dow Jones Newswires; 44 20 7842 9493;
nick.hastings@dowjones.com TALK BACK: We invite readers to send us comments
on this or other financial news topics. Please email us at
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right not to publish reader comments.

PBOC Zhou Urges Govts To Give Fin Mins Authority To Act Fast

People's Bank of China Gov. Zhou Xiaochuan Thursday
suggested world governments give their finance ministries and central banks
authority to take bold steps to deal with severe crises so that they have the
means to handle such crises when they strike.

He said delays had taken place in the latest crisis.

"To stabilize markets under severe stress, finance ministries and central
banks need to act fast and apply extraordinary measures," Zhou wrote in an
essay published on the central bank's Web site.

"Untimely or delayed response falls behind the curve and would make the
outcome less than desired even if the response is correct and strong," he said.

"Going forward, national governments and legislatures may consider giving
pre-authorized mandates to ministries of finance and central banks to use
extraordinary means to contain systemic risk under well-defined stress
scenarios, in order to allow them to act boldly and expeditiously without
having to go through a lengthy or even painful approval process," he said.

The essay elaborates on comments Zhou made in November, at the meeting of
Group of 20 central bankers and finance ministers in Sao Paulo, Brazil.

In contrast, he said, China has responded "decisively" and quickly to the
crisis, loosening monetary policy and introducing the CNY4 trillion stimulus
plan in November.

"Facts speak volumes and demonstrate that compared with other major
economies, the Chinese government has taken prompt, decisive and effective
policy measures, demonstrating its superior system advantage when it comes to
making vital policy decisions."

The essay, titled "Changing Pro-Cyclicality for Financial and Economic
Stability," also discusses features of the world's financial system that
magnify swings in the market.

Among the examples, the three main ratings agencies tend to give "highly
correlated" ratings, he said.

"Economic upswings produce euphoria and downturns generate pessimism," he
said, adding the rapid downgrades of ratings in the latest financial crisis
drove massive write-downs at financial institutions and "exacerbated downward
spirals."

-By China Bureau; Dow Jones Newswires; 8610 6588 5848;
djnews.beijing@dowjones.com

Iran Confirms Attendance At Afghanistan Meeting - Reuters

Iran has confirmed it will participate in Tuesday's U.N.
conference in The Hague on the future of Afghanistan, but has yet to decide who
to send, Foreign Ministry spokesman Hassan Qashqavi said Thursday, as reported
by Reuters.

"Iran will participate. The level of participation is not clear," said
Qashqavi.

U.S. Secretary of State Hillary Clinton said earlier this month Tehran would
be invited to the conference to discuss Afghanistan.

Full story:
http://www.reuters.com/article/topNews/idUSTRE52P1U520090326?feedType=RSS&feedNa
me=topNews

-London bureau, Dow Jones Newswires; +44 (0)20 78 42 9330;
generaldesklondon@dowjones.com

ASIA OUTLOOK 19 Maret 2009

EUR still on the rise after Fed's decision
to broaden quantitative easing, with EUR/USD going over 1.35 for its highest
level since Jan. 9; now at 1.3522 vs 1.3480 late in NY, having gone briefly as
far as 1.3533. USD/JPY meanwhile falls below 96 for its lowest mark since Feb.
24; now at 95.90 vs 96.21 in NY.

EUR/JPY at 129.72, vs 129.70 in NY. Stocks
have positive cue from Wall Street, which gained on Fed news; NZ shares +0.5%.
Watch for rise too in government bonds as Treasurys rallied; 10-year yield had
its biggest fall in two decades. Data include Japan All Industry Index 2350
GMT, RBA Bulletin 0030 GMT; Aussie dwelling unit commencements 0030 GMT, plus
international merchandise imports, with HK trade 0830 GMT. Weekly India WPI
0630 GMT. BOJ monthly report due.

Europe has Italy trade, UK public sector
finances and U.S. has weekly jobless claims, Philly Fed index.(RXM)

Market Summary 19 Maret 2009

U.S. dollar tumbled sharply after Fed surprised markets by escalating quantitative-easing program, signaling more
aggressive approach to keeping longer-term yields low, stabilizing credit
markets. EUR/USD reached 1.3499, highest level since Jan. 9, marking one of its
biggest intraday gains; in early NZ trade euro tapped 1.3533, and dollar fell
below 96 against yen for 1st time since Feb. 24.

Dollar selloff was triggered
after Fed said it would expand its purchases of mortgage-backed securities by
additional $750 billion plus spend as much as $300 billion to purchase U.S.
Treasurys; "the U.S. dollar took a significant hit right across the board,"
said Dustin Reid, director at RBS Greenwich Capital Markets; says mechanics of
Fed program increases money supply, erodes the value of the dollar; confidence
boost to markets also increasing risk-appetite, reducing safe-haven flows to
dollar.

Late Wednesday, EUR/USD was 1.3480 vs 1.3009, last at 1.3522 in
Wellington. USD/JPY 96.21 vs 98.54, last 95.85; EUR/JPY 129.70 vs 128.17,
GBP/USD 1.4288 vs 1.4041, USD/CHF 1.1432 vs 1.1828. Stocks rose as Fed decision
boosted financial institution shares such as AIG, Bank of America; Citigroup
rose 23%, to triple value since early March low; BofA +22% to highest level
since January. Dow +1.2%, Nasdaq +2%. Treasurys surged on Fed move with 10-year
yield posting steepest one-day drop in more than 2 decades; bonds rallied
across board. "It takes your breath away," said Chris Ahrens, interest rate
strategist at UBS Securities LLC. 10-year yields fell 47.9 bps to 2.52%,
30-year fell 25 bps to 3.55%.

Nymex April crude down $1.02 at $48.14/bbl as
prices backed down from recent highs near $50 after data revealed U.S. crude
stockpiles at their fullest since 2007. Comex April gold fell $27.70 to
$889.10/oz, mostly on chart-based long liquidation after some of the recent
safe-haven demand waned. (SML)

AIG's Liddy: AIG Likely Won't Ask For More Federal Money

American International Group Inc. (AIG) chairman and
CEO Edward Liddy said that he didn't expect that the company would request more
federal funds and that the company hoped it wouldn't exhaust $173 billion
pledged to it by the government.

Liddy is testifying before the U.S. House Financial Services Capital Markets
Subcommittee Wednesday. Liddy indicated that $30 billion steered to AIG earlier
this month by the federal government may not be used.

"I do not anticipate asking the federal government for more money," Liddy
said. "I would like very very much if we did not have to draw on the $30
billion."

Asked directly about how long it will take for the company to wind down its
financial products division - the source of much of its problems - Liddy said
it could take as long as four years. He said the company should be able to show
"tremendous progress" on winding down various books of business by the first
quarter of 2010, but that getting the whole division unwound could take longer.

Liddy also said that he didn't expect businesses currently under the AIG
umbrella to continue using the AIG name in the future.

"I think the AIG name is so wounded and disgraced, we'll probably have to
change it," he said.

Fed Has Gone "All In" - RBC

Fed has gone "all in," says RBC Capital Markets senior
FX strategist David Watt; "while the FOMC left rates unchanged at de minimis
levels, they decided there was no time like the present to announce plans to
buy U.S. Treasurys, $300 billion over the next six months to be exact, focused
primarily on the two-to-ten-year part of the curve. That amounts to $50 billion
a month, but the values are not as important as the symbolism, and those values
are likely just the opening gambit." Adds "the Fed is not going to sit on its
hands; it is going to remain proactive. U.S. equities fell in love with Ben
Bernanke all over again, while the dollar was taken to the woodshed and beaten
like a dog. And after a short rest, beaten like a dog again. Market sentiment
on the Fed's maneuver was crystal clear."(RXM)

FED WATCH: Democratic, Or Just Dazed And Confused?

The Federal Reserve's dramatic decision Wednesday to
commit an additional $1 trillion-plus to steadying the economy and financial
markets gave equity and fixed-income markets a much-needed jolt.

But the one-day fix may come at the expense of the Fed's reputation for
clarity and predictability.

It might be something investors and the public just have to live with under
the Ben Bernanke era, where an apparently more democratic and consensus-driven
approach means meeting outcomes aren't always going to be foregone conclusions.

Whatever the rationale, the Fed's $300 billion Treasury purchase shocker
caught Fed watchers off guard.

The announcement came less than two weeks after the Fed's main ambassador to
Wall Street, New York Fed President William Dudley, appeared to close the door
to the idea. "At this point in time the Fed has judged buying long-term
Treasurys is not the most efficient means of easing financial market
conditions," Dudley said.

Of course, that's a bit of a noncommittal committal. With the benefit of
hindsight, Dudley seemed to be referring to what the Fed's thinking was to that
point, and it wasn't a promise of future action (or inaction). But at the time,
it appeared to be a clear signal that buying Treasurys wasn't on the immediate
horizon.

Another head-scratcher from Wednesday's statement was Richmond Fed President
Jeffrey Lacker's shift from the "nay" to "yea" camp. He had dissented at the
January FOMC meeting because he wanted the Fed to increase the monetary base
via Treasury purchases and not targeted credit programs.

The Fed took a baby step toward Lacker with the Treasury purchase plan. But
it took a giant leap away by supersizing the agency debt and agency-backed
mortgage backed securities purchase plans by a combined $850 billion to $1.45
trillion. Those programs, and others like the $1 trillion Term Asset-Backed
Securities Loan Facility, are precisely the kind of market-specific facilities
that Lacker had opposed.

One interpretation may simply be that the outcome of a meeting can't, or
shouldn't, be predetermined. The Fed now meets for two-day stretches, giving
lengthy time for discussion, and even perhaps for minds to be changed.

"What we're seeing is if there's a more democratic monetary policy,
individual participants talk about it...and small shifts in the median voter is
enough to move a program," said Vincent Reinhart, an American Enterprise
Institute economist who headed the Fed's monetary affairs division under former
Chairman Alan Greenspan and in the early months of Bernanke's term.

And there may be a good economic rationale for being so aggressive now.
Although gross domestic product likely fell again in the first quarter after
plunging 6.2%, at an annual rate, in the fourth quarter, there are some signs
of stability.

Consumer spending was fairly solid in the first two months of the year, and
housing starts appear to have stabilized, albeit at very low levels. If the
economy has indeed hit bottom, then the Fed's actions might add some wind to
the sails. At least there's less of a risk they'll be overwhelmed by a
deepening recession.

It's harder to have a charitable view about how the Fed is arriving at these
mind-boggling figures. It's unclear why the Fed decided that $750 billion, and
not $100 billion or $400 billion, was the right amount to increase the MBS
facility, or why they doubled the separate agency debt program instead of, say,
quadrupling it.

"The sizes do puzzle me," said Reinhart, as do the changes that occurred in
the intermeeting period to prompt the actions. "Why are circumstances so much
different this time?"

Fed Hold Rates Near Zero; To Buy Tsys, More MBS

The Federal Reserve said Wednesday it will buy up to
$300 billion in longer-term Treasurys and raise the size of a lending program
aimed at mortgage-backed securities by another $750 billion, a forceful
reminder that officials still have powerful tools to combat the recession.

The Fed, as universally expected, also took no action on its main policy
rate, holding it near zero.

The commitment to buy Treasury securities and additional mortgage-related
debt will almost certainly cheer Wall Street, since the combination should mean
lower rates for a variety of business and consumer loans.

The Federal Open Market Committee voted 10-0 to hold the target federal-funds
rate for interbank lending in a range between zero and 0.25% and to continue
using credit programs financed by an expansion of the Fed's balance sheet to
stabilize markets.

Richmond Fed President Jeffrey Lacker, who dissented in January, went along
with the rest of the FOMC this time. He had wanted the Fed to focus on Treasury
purchases as opposed to targeted credit programs.

The discount rate for Fed loans was unchanged at 0.5%.

"Information received since the [FOMC] met in January indicates that the
economy continues to contract," the Fed said.

Officials repeated their pledge to keep rates exceptionally low for an
extended period. With rates near zero, the Fed has financed its various credit
facilities via an increase in bank reserves - essentially printing money, as
Fed Chairman Ben Bernanke explained in a "60 Minutes" interview aired Sunday.

The Fed will buy up to $300 billion in long-term Treasurys over the next six
months, it said. The additional mortgage-backed securities purchases will push
the Fed's mortgage-related facility to as much as $1.25 trillion. The Fed also
said it would increase the size of its agency debt purchase facility by $100
billion to $200 billion.

The Fed's strategy appears to be to double down on the programs that it
thinks work. In addition to commercial paper and money market mutual fund
facilities, which appear to have stabilized those sectors, Bernanke has
repeatedly highlighted the decline in mortgage rates in response to the agency
and mortgage-backed securities facilities, calling it one of the "green shoots"
evident in some markets.

The Fed also said it would like to expand eligible collateral for the Term
Asset Backed Securities Loan Facility, or TALF. The TALF is aimed at spurring
new lending in consumer, student loan, small business and real estate markets
and could eventually total $1 trillion. The Fed is accepting applications for
some of those TALF loans and will start dispersing funds next week.

As for the economy, the Fed said, "although the near-term economic outlook is
weak, the Committee anticipates that policy actions to stabilize financial
markets and institutions...will contribute to a gradual resumption of
sustainable economic growth." Exports, meanwhile, "have slumped," the Fed said,
reflecting the global downturn.

U.S. gross domestic product is on track to decline 5% or more, at an annual
rate, in the first quarter. It plunged at a 6.2% rate in the fourth quarter of
2008, the steepest in a quarter century. The pace of employment loss has
stepped up since the January meeting, with the economy now shedding more than
650,000 jobs per month, pushing the unemployment rate to 25-year highs.

One nugget of good news is that consumer spending figures signaled some
stabilization since the start of the year. Since consumption makes up about 70%
of the economy's output, a revival in spending would signal better times ahead.
But economists are divided on how to interpret the January-February figures.

Officials made few changes to their assessment of inflation, repeating that
it should stay subdued and may even persist for a while below rates the Fed
thinks are consistent with a growing economy and price stability.

U.S. consumer prices rose for a second-straight month in February, the
government said Wednesday, easing fears somewhat over prolonged price declines
known as deflation.

However, consumer prices are up just 0.2% from a year ago, well below the 2%
rate most Fed officials think is consistent with their long-term goals.

Tsys Surge After Fed Moves To Buy Gov Bonds

2:26 (Dow Jones) Treasurys surge across the board after the Fed moves to buy
government debt. The Fed says it will buy up to $300B in Treasurys over the
next six months. Ten-year note up 3 points to 100 26/32 to yield 2.65% while
the 30-year bond is up 5 4/32 to 99 22/32 to yield 3.53%. DJIA back around
session highs, up 111.

2:24 (Dow Jones) Euro soars to eight-week high of $1.3351 after the FOMC
decision, rising more than two cents from its levels just prior, $1.3110. In
NY, EUR/USD was at 1.3302 from 1.3009 late Tuesday.

2:22 (Dow Jones) The FOMC economic outlook is largely the same, but it is
seriously pushing up its campaign to aid credit markets. It is upping it
mortgage market interventions massively, and adding to it the purchase of
Treasury securities. If the balance sheet size was something that was keeping
you up at night, you haven't seen nothing yet! Treasurys yields plummeting;
10-year yeild down to 2.66%. DJIA up 61.

2:20 (Dow Jones) In an effort to continue propping credit markets the Fed has
announced it will buy Treasurys and Agencies.

2:19 (Dow Jones) The FOMC says they will buy Treasurys, against expectations.
This is a big surprise and will have a large impact on the bond market. DJIA
shoots higher, now up 25.

2:13 (Dow Jones) The phenomenal growth of Facebook has so far likely helped
Google (GOOG) gain market share, RBC Capital Markets says. But firm warns that
could change if Facebook's rapid growth trajectory continues and it finds a
business model that sucks ad dollars away from other online media. "We think
Facebook as the 'starting point' for more and more users on the Internet could
create some multiple compression for Google over time, if the momentum
continues," firm says. GOOG down 1% to $332.12.

2:09 (Dow Jones) Investors should buy into any weakness that Hot Topic (HOTT)
may experience now that Wal-Mart (WMT) plans at week's end to roll out its own
merchandise related to the teen vampire movie "Twilight," which HOTT has been
selling for sometime, FBR said. That's because HOTT's March and April comps
will still benefit from "Twilight" sales, even if WMT does take some business
away. HOTT up 0.4% to $9.51.

2:02 (Dow Jones) The outcome of the FOMC meeting lies dead ahead and there's
really only one source of drama. While no one expects the Fed to annouce the
purchase of longer-term Treasurys, the last two statements have discussed the
ongoing study of the issue. Whether the Fed repeats that or not could offer
clues about whether in fact this will happen at some point. Another mention
keeps the idea alive, while an ommission may mean it's off the table.
Otherwise, look for the Fed to be downbeat on growth, worried inflation is too
soft and keeping interest rates pinned effectively at zero.

1:52 (Dow Jones) Nasdaq Comp and S&P 500 have turned higher, and the DJIA is
down but a fraction, as the FOMC statement nears and Congress grills AIG's
Liddy. Financials again lead rising sectors; energy, consumer staples lead
decliners. Frankly, we'll get interested in Congressional hearings when members
of Congress are sitting in the low seats, answering the questions instead of
asking them. Freddie Mac discloses apparently mandated bonuses it has to pay
its executives. Does anybody understand a bonus is supposed to be a reward for
a job well done? Apparently not. DJIA down 29, S&P 500 up 2, Nasdaq Comp up 13.

1:41 (Dow Jones) Canada has received lavish global praise for its sound
financial system, yet amid all the back-patting is the rather uncomfortable
fact that its economic indicators are now deteriorating nearly as quickly as
their US counterparts, Doug Porter, deputy chief economist at BMO Capital
Markets, says. Contributing to the decline are three particular vulnerabilities
for Canada: a heavy reliance on auto production, a heavy reliance on
commodities and the fact that the recent construction boom is starting to
correct, he says. "These three factors help explain why there will be precious
little separation between the Canadian and US economies either during this
year's deep downturn or next year's shallow recovery," Porter says.

1:33 (Dow Jones) ProLogis (PLD) up sharply, possibly on a report from The
REIT Newshound saying Stockbridge Capital Partners and Teacher Retirement
System of Texas are positioning to buy a "sizable" portfolio of US assets from
ProLogis. A ProLogis representative wasn't immediately available to comment on
the report, which cited unnamed sources. The Newshound quoted the company's
director of investor relations as declining to comment, but noted PLD has said
it was marketing assets that could generate $500M-$600M in proceeds. PLD up
9.8% to $7.03.

1:25 (Dow Jones) Sanford Bernstein cuts price target for Edison International
(EIX) to $36 from $39, based on EIX's 2009 EPS forecast filed late Monday of
$2.90-$3.20; Bernstein sees 2009 EPS at $3.11. They note EIX's projected 13%
rate-base growth at utility Southern California Edison is lower than expected;
see 2010 EPS at $3.69, 2011 at $4.14; and predicts EIX's $20.4B capex plans for
2009-2013 will likely come in 4% lower due to transmission project permitting
delays. EIX down 2.8% at $27.51.

Breaking News: The Fed Leaves Both Rates Unchanged and to Buy Treasurys!

The FOMC says they will buy Treasurys up to $ 300B over the next six months, against expectations. This is a big surprise and will have a large impact on the bond market.

Dollar Falls Versus Euro And Yen Ahead FOMC

The dollar sold off against the euro and yen Wednesday
morning, with the euro extending earlier gains above $1.3150, ahead of the
Federal Open Market Committee meeting decision.

Traders appear to be getting rid of dollars ahead of the Fed announcement,
expected at 2.15 p.m. EDT Wednesday, and after the release of U.S. data that
didn't disappoint, an encouraging factor lately.

The euro rose to a fresh 7-week high of $1.3157.

The dollar also declined to a session low of Y97.73.

"It does suggest a degree of pent up demand to get rid of the dollar," said
Stuart Bennett, a senior currency strategist at Calyon in London.

Now above the $1.30 level, the euro is also benefitting from some technical
positioning. Traders likely set up trades to sell and buy above this key level.

Wednesday morning in New York, the euro was at $1.3128 from $1.3009 late
Tuesday, and the dollar was at Y97.96 from Y98.54, according to EBS. The euro
was at Y128.55 from Y128.17. The U.K. pound was at $1.3998 from $1.4041, and
the dollar was at 1.1658 Swiss francs from CHF1.1828 Tuesday.

The euro's gains escalated on the heels of an early morning advance after the
Labor Department reported U.S. consumer prices increased for a second-straight
month in February, raising the odds that the U.S. will avoid a protracted
deflationary spiral.

"Anything that indicates deflation is not around the corner is probably a
positive for markets in general, helping risk appetite," said Vassili
Serebriakov, a currency analyst at Wells Fargo.

Traders typically sell the dollar, a major funding currency, when risk
appetite rises.

The euro was already gaining after a U.K. jobs report boosted the common
currency versus the U.K. pound, gains that had cross-currency repercussions on
the dollar.

The Office for National Statistics said the U.K. jobless claimant count
jumped 138,400 in February, the biggest monthly gain since records began in
1971 and pushing unemployment above 2 million for the first time in almost 12
years.

The U.K. pound also fell because of an International Monetary Fund report
that concludes the U.K. recession will be longer and deeper than anticipated.

The IMF is expected to report later this week that the U.K. economy is set to
continue to contract well into 2010, according to the U.K. daily newspaper The
Times.

Teresa Ter-Minassian, an adviser to IMF Managing Director Dominique
Strauss-Kahn, told reporters Tuesday that the IMF now expects the U.K. economy
to contract 0.2% in 2010 after shrinking an expected 3.8% this year.

The euro rose as high as GBP0.9416.

"The real theme of March is those currencies that have been moving toward
some form of zero interest rate, or quantitative easing, have been under
significant pressure," said Jim McCormick, global head of currency strategy at
Citigroup in London, citing the U.K. pound, Swiss franc and dollar.

In addition, the dollar appears under increasing pressure this month as risk
appetite rebounds.

"This will depend importantly on what the Federal Reserve has to say...,"
said McCormick.

Stocks Decline At Opening Bell

Dow Industrials Slide 70 Points

U.S. stocks pulled back after the previous day's rally, as investors awaited
the outcome of a two-day Federal Reserve meeting.

The Dow Jones Industrial Average was down 51 points. The S&P 500 declined
0.5% and the Nasdaq Composite Index fell 0.03%.

A surprising jump in housing starts last month helped drive stocks to the
fifth winning session in six Tuesday. The Dow industrials rallied by 178.73
points, leaving the blue-chip gauge 13% above the bear-market lows it hit on
March 9. Major indexes are at their highest levels in a month.

The Federal Reserve will conclude a two-day meeting Wednesday. The central
bank is expected to leave interest rates unchanged, but investors will be
parsing the Fed's post-meeting statement for any signals that its outlook has
changed or that it will take more measures to lubricate money markets. The Fed
had said in its last statement that it was prepared to purchase long-term
Treasurys if needed to improve credit conditions.

Most commentators expect that the Fed won't announce such steps Wednesday as
long-term interest rates remain low, which has driven down mortgage rates. Data
Wednesday from the Mortgage Bankers Association showed mortgage applications
rose 21% last week as the average 30-year fixed rate fell to 4.89%. But
economists expect the Fed will keep the possibility of such purchases open.

The Fed's statement is expected to be released around 2:15 p.m. EDT.

Treasurys were gaining in recent trading as stocks weakened; the yield on the
30-year bond was around 3.75%. In other economic news, consumer-price data were
released for February, showing a 0.4% increase and raising the odds that the
U.S. will avoid a protracted deflationary spiral.

Shares of Sun Microsystems jumped 65% after the Wall Street Journal reported
that International Business Machines is in talks to acquire the company. IBM is
likely to pay at least $6.5 billion in cash, or double Sun's closing price
Tuesday. IBM shares were down about 1.8%.

Most European stock markets fell. The pound dropped against the dollar after
a dismal report on U.K. employment. Asian indexes gained; the Nikkei 225 rose
0.7%. The Bank of Japan said that it will increase its purchases of government
debt and that it was considering providing loans to banks.

Madoff akui penipuan $50 miliar

Miliarder Amerika Bernard Madoff mengaku bersalah atas 11 butir dakwaan atas penipuan senilai 50 miliar dollar dan menyatakan dia menyesal.

Madoff mengatakan, dia "sangat menyesal dan malu" tidak lama setelah hakim memerintahkan agar dia dijebloskan ke penjara.

Madoff, 70 tahun, mengelola skema investasi Ponzi di mana investor awal dibayar dengan uang klien baru.

Sidang pengadilan mendengar penjelasan sebagian dari ribuan korban Madoff. Sedikintya 20 investor Madoff telah meminta diberi kesempatan untuk memberikan keterangan di pengadilan.

"Saya tidak mungkin bisa cukup menyatakan betapa menyesal saya atas yang perbuatan," kata Madoff di ruang sidang.

Dia mengatakan, ketika dia memulai penipuan, dia keliru berharap bahwa tindakan itu hanya akan berlangsung singkat.

"Saya menyadari bahwa penahanan saya dan hari ini pasti akan tiba," kata Madoff.

Sejak ditahan bulan Desember, Madoff terkurung di apartemennya yang mewah di Manhattan.

Vonis kasusnya akan diumumkan 16 Juni.

Pemutihan uang

Pernah menjadi bos pasar saham Nasdaq, Madoff menjadi tokoh Wall Street selama lebih dari 40 tahun.

Dia satu-satunya orang yang didakwa dalam penipuan besar-besaran yang melilit perusahaannya, Bernard L Madoff Investment Securities.

Jaksa mengatakan, penipuan itu berlangsung setidaknya sejak 1980-an, tapi Madoff mengatakan di pengadilan, penipuan mulai berlangsung awal 1990-an, sebagai reaksi atas resesi.

Madoff menghadapi 11 butir dakwaan, termasuk empat penipuan.

Di samping itu, dia menyatakan bersalah atas tiga dakwaan pemutihan uang, dan memberikan keterangan palsu, berbohong, dan menyerahkan laporan palsu kepada badan pengawas keuangan Amerika, dan pencurian dari dana tunjangan karyawan.

'Jenius'

Salah seorang korban Madoff, Burt Ross, mantan walikota Fort Lee, New Jersey town Fort Lee, mengatakan, dia memperkirakan dia tidak akan bisa mendapatkan kembali satu sen pun dari 5 juta dollar yang dia tanamkan.

"Bernard Madoff jenius" kata Ross. "Anda berhadapan dengan penipu yang mungkin terbesar dalam sejarah dunia."

Penyelidik mengatakan, mereka masih melanjutkan upaya untuk mendapatkan kembali seluruh dana yang dicuri Madoff, tapi kebanyakan pengulas - dan kebanyakan investor mengatakan, sangat tidak mungkin seluruh dana investasi akan ditemukan.

SKEMA PONZI

• Skema investasi curang, investor dibayar dengan uang yang disetor investor lain, bukan laba riil

• Diambil dari nama Charles Ponzi yang menggunakan teknik yang sama di AS pada 1920-an

• Piramida dari teknik penjualan piramida, investoror menanamkan modal pada ornag yang sama