Democrat greed drives down market

Times:

Just after the collective sigh of relief was drawn following last week’s financial turmoil, a startling late plunge in the US stock market last night started a fresh wave of fears for banks, savers, pension holders and employees.

It had appeared that a $700 billion (£378 billion) bailout of the banking system announced by the US Government on Friday had restored some stability.

But the stock market euphoria generated by the plan disappeared yesterday as political squabbling over the terms of the rescue threatened to delay the Bill. A sudden surge in oil prices also unsettled the markets.

The Dow Jones industrial average, the benchmark gauge of US stock prices, dived 372 points, more than 3 per cent, to 11,015. wiping out Friday’s gains. In London the FTSE 100 ended down 75 points at 5,236, but it had closed before Wall Street’s slide accelerated. Global financial markets look set to endure another torrid session today.

The sharp rise in oil prices was sparked in part by concerns that the scale of the bailout may undermine the dollar, in which oil is traded. At one stage the US crude futures price for a barrel of oil leapt by a record $25.45 to $130, although traders attributed much of those gains to technical factors. Benchmark Brent crude was up $6.12 to $105.73. The political squabbling emanates from the Capitol where Democrats have threatened the progress of the legislation.

Barney Frank, chairman of the House Financial Services Committee and a powerful Democrat, wants to make the banks pay by allowing bankruptcy judges to make mortgage lenders change the terms of their home loans. Such a move would be designed to keep troubled borrowers in their homes. He also wants to legislate executive pay and allow Washington to claw back compensation later deemed to have been excessive.

But the confusion and upheaval wrought by the financial crisis brought at least one buyer to the table yesterday with Nomura, the Japanese bank, set to buy large parts of the collapsed Wall Street firm Lehman Brothers in London, potentially saving up to 1,500 jobs.

Pictures of Lehman staff leaving their offices with cardboard boxes full of their belongings underscored the full human cost of the crisis as almost 5,000 job losses appeared unavoidable. But Nomura has guaranteed to offer jobs to at least 700 of Lehman’s frontline investment banking staff and has signalled its willingness to employ hundreds more of its administrative and support staff.

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The Democrats are using the crisis to play lets make a deal and it is spooking the market and raising concerns about inflation because of the excess spending they want to add to the deal. Inflation concerns in turn are driving of the cost of oil which will push prices higher in the US. This is happening at the same time the Democrats are pushing a bill to restrict drilling in areas with 87 percent of the known reserves. By not moving rapidly to close a deal the Democrats hope to benefit politically from the bad economic situation they are creating.

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