Morning Economic News - October 15, 2008

Things could be shaping up for another fairly sedate day on Wall Street Wednesday, as US stock futures are mixed in overnight trading with the DJIA futures down 22 points, S&P 500 futures down 0.9 points and NASDAQ 100 futures up 10 points [2:32 AM Eastern]. The Nikkei is up 1%, the Hang Seng is down almost 3% and the S&P/ASX 200 is down 0.81%. The dollar is up against the euro, down against the pound and yen, all within fairly narrow ranges. Commodities, including oil, are down slightly.

Federal Budget 2008

• Fiscal 2008 (Final): $454,806 billion Deficit


• Fiscal 2007 (Final): $161,527 billion Deficit

Spanish Leading Index Up Strongly on Monetary Policy

The Spanish index of leading economic indicators broke a three month
down streak with a 0.6% increase in August, but the Coincident Index
fell for the fourth time in six months, down 0.1%. The strength in the
Leading Index was not widespread, stemming almost entirely from a
single factor: Spanish contribution to euro M2, a money supply measure
reflecting pump priming monetary policy in August.

Best news of last week: the unregulated free market did not collapse

It's an arcane topic and that's probably why you haven't heard much about
it, but the settlement of $400 billion of credit default swaps on
Lehman bonds that occurred a few hours prior to Friday's market close
was a major positive event.
...In the end, it was almost a nonevent. In the greatest story of this crisis not yet
told, the private market mechanism set up to handle the settlement of
the swaps worked perfectly....

Devil Is in Bailout's Details

The Bush administration's plan to prop up banks creates a
thicket of issues, most pressingly whether the banks will step up
lending.

No Quick Fix for Housing Prices

The rescue plan for the U.S. financial industry doesn't directly address the root cause of the crisis: falling home prices.

Paulson Lacks Leverage to Force Banks to Put Federal Cash Infusion to Work Treasury Secretary Henry Paulson
persuaded nine major U.S. banks to accept $125 billion in
government investment. Getting them to lend it out may prove a
tougher sell.

Trichet Says Credit Crisis Calls for Return to Bretton Woods `Discipline' European Central Bank President Jean-
Claude Trichet said officials reshaping the world's financial
system should try to return to the ``discipline'' that governed
markets in the decades after World War II.

Bank of Japan to Offer Unlimited Dollar Funds to Ease Money Market Strains The Bank of Japan said it will offer
lenders as many dollars as they want, joining European
counterparts in attempting to lower borrowing costs in money
markets and freeing up credit worldwide.

Roubini Predicts Worst U.S. Recession in 40 Years, End to Market Recovery Nouriel Roubini, the professor who
predicted the financial crisis in 2006, said the U.S. will suffer
its worst recession in 40 years, driving the stock market lower
after it rallied the most in seven decades yesterday.

Australian Government May Add to $7 Billion Stimulus Package, Gillard Say Australia's A$10.4 billion ($7.2
billion) economic stimulus package won't feed inflation and may
be followed by extra spending as the global financial crisis
freezes credit and slows growth, deputy prime minister Julia
Gillard said.

Fed Offers GE, Citigroup Subsidized Cash Through Fund for Commercial Paper The Federal Reserve may subsidize
America's companies by purchasing their short-term debt at rates
below those demanded by private investors in the $1.6 trillion
commercial-paper market.