New York, Sept.26 (ANI): US federal regulators have seized assets of Washington Mutual, the giant lender, and sold some of it in a bid to arrest the meltdown on Wall Street.

Regulators brokered an emergency sale of virtually all of Washington Mutual - the nation's largest savings and loan, with $307 billion in assets - to J P Morgan Chase, reports the New York Times. The move came as lawmakers were stalemated over the passage of a 700 billion dollar bailout fund meant to help ailing banks, and removes one of America's most troubled banks from the financial landscape while mitigating another potentially huge taxpayer bill for the rescue of another failing institution.

Shareholders and some bondholders will be wiped out.

The Federal Deposit Insurance Corporation guarantees up to the 100,000 dollars per account limit as far as Washington Mutual deposits are concerned.

J P Morgan Chase is to take control Friday of all of Washington Mutual's 2,300 branches, which stretch from New York to California.

The New York-based bank will oversee its big portfolio of mortgage and credit card loans. It will also acquire all of its deposits with the sale. The seizure and the deal with J P Morgan came as a shock to Washington Mutual's board, which was kept completely in the dark.

The company's new chief executive, Alan C. Fishman, was in midair, flying from New York to Seattle at the time the deal was finally brokered, according to these people.

Sheila Bair, the chairwoman of the F.D.I.C., said the government took action Thursday, and not on a Friday as is typical for bank closures, after reports of a deal seeped out, potentially causing depositors to worry.

The deal will end Washington Mutual's 119-year run as an independent company. (ANI)

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Washington, Sept.26 (ANI): The fate of the Bush administration's 700 billion dollar bailout package is still in suspense, even after the president met presidential candidates John McCain and Barack Obama, and Congressional leaders at the White House on Thursday.

The debate over the proposed bailout of the financial industry continued late into the night, with congressional Democrats saying they're still working toward an agreement and Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke due to meet with lawmakers.

The summit at the White House was intended to be a consensus-building exercise, reports Fox News.

But as Obama and McCain left, officials and aides who had attended the meeting said the summit had ended on a very low note.

"This meeting ended bad - real bad," one source told FOX News.

Others described the tone as "angry" and "heated," saying Democrats were upset with House Republicans in particular who would not drop their opposition to the administration's proposal.

"We may have gone backward," another source said.

Some Democratic leaders said as much publicly, laying the blame partly on McCain, whom they accused of destabilizing the talks by calling for the candidates to enter the economic negotiations.

"The next thing we know, he's in a position frankly where he's making it harder to get things done, rather than help us negotiate differences," Representative Barney Frank, Democrat (Massachusetts), said.

Obama said more work needs to be done to resolve differences, but he didn't see a need for the candidates' direct involvement in negotiations.

"Here's my observation and I think this may have been confirmed at the meeting today - when you inject presidential politics into delicate negotiations, sometimes it's not helpful. The cameras change things," Obama told FOX News.

"It's not clear to me that having presidential candidates in a high-profile way in the negotiating process is useful," he added.

Banking Chairman Chris Dodd said, "It was a photo op for John McCain. ... It was a rescue plan for John McCain."

Bush called Thursday's emergency meeting with lawmakers the night before, after Sen. McCain announced he was suspending his campaign activities to deal with the rescue package.

Though McCain and Obama exited without making any comments, Republican Sen. Richard Shelby of Alabama emerged from the meeting to declare there was no agreement.

The top two Republican leaders in Congress, House Minority Leader John Boehner and Senate Minority Leader Mitch McConnell, issued statements saying there was not yet an agreement.

White House press secretary Dana Perino said after the high-stakes meeting that "there is a clear sense of urgency and agreement on the need to stabilize the financial markets and prevent a massive financial crisis from affecting everybody in America."

But as to the substance of the meeting, she said, "members of the administration and the congressional leaders pledged to continue working together to finalize a bill that will address concerns and solve the problem as soon as possible." (ANI)

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Singur/Dehradun, Sept 26 (ANI): Tata Motors has begun moving equipment out from its factory in Singur due to the prolonged disruption of work. "We were asked to remove machineries as the work is anyway stalled. There are a lot of problems here, and it doesn't seem the work will begin," said Rajiv, a worker.

Meanwhile, West Bengal Industries Minister Nirupam Sen reportedly told the state Cabinet that there is little possibility of the Tata's Nano car project taking off from Singur.

Some vendors were seen moving their equipment over the past few days from the project site, where work has remained suspended for over three weeks.

Sources said the equipment was carted out from the plant to the company's plant in Pantnagar in Uttarakhand.

Uttarakhand Chief Minister B C Khanduri said he would be glad if Tata's rolls out the Nano from his state.

"I am not aware of his demand, whatever they may be, we will deliberate on that. We will be happy if Nano rolls out from our state," said Khanduri.

Tata Motors officials, who held meetings with the state officials, however, denied that talks were on for a new plant site.

"We have asked for land for residential purpose. There were no talks about land for setting up plant here," said A S Puri, General Manager, Tata Motors.

Trinamool Congress chief Mamata Banerjee, who is demanding the return of the land "forcibly" acquired from farmers, has placed fresh demands before State Governor Gopalkrishna Gandhi.

Mamata has rejected a package offered by the State Government that envisages sustained economic rehabilitation for all farmers whose land has been acquired.

She has also demanded that Article 355 be invoked if the Government failed to abide by the September 7 agreement, initiated by the Governor, on the return of land.

Trouble began after the West Bengal Government acquired 1000 acres of farmland for the Tata Motors' small car plant at Singur last year.

The Government offered compensation, which some farmers rejected and the Trinamool Congress has been demanding that at least 400 acres be returned to farmers.

The Government says it is in favour of a land-based solution for farmers but against disturbing the Tata Motors plant site. (ANI)

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Mumbai, Sept 25 (ANI/Business Wire India): Financial markets are all about confidence in the system and an underlying assumption that system will not fail. But, after the bankruptcy of Lehman Brothers in USA and Northern Rock in the UK and the bailout of Fannie, Freddie and AIG investors, people have lost confidence in the system. In fact, some people have even started being skeptical, if any system exists at all.

Their doubts are not unfounded as the tricky web of Credit Default Swaps (CDS) and Collateralized Debt Obligations (CDO), which are traded privately and no one, including SEC, FED or the US Treasury regulates them.

There is an unregulated trillion dollar market which has no system in place to track, follow and regulate the flow of deals and transactions. It all started with the boom in the US real estate market a decade back.

The cheap credit fuelled the real estate rally for almost a decade. The innovative Investment Bankers at Wall Street wanted a pie of the action and devised some new innovative instruments like mortgage-backed securities and insured them with Credit Default Swaps.

It was a great innovation as home owners got cheap credit hence they kept buying more and more. Mortgage companies then started packing these mortgages as underlying securities and sold and resold them through investment banks.

Lehman and Merrill who were initially acting as Investment Banks eventually ended up buying these securities by leveraging with Commercial Banks like UBS. Next, UBS funded securities like these, by innovating Credit Default Swaps insurance in case of a Credit Default which was written mostly by firms like AIG.

Everyone thought they were safe. The Mortgage Banks were the most to benefit as they were able to lend more and more and make the spread. Investment Banks made profits in brokering the deal and eventually started making spreads. Some of them even took principal positions in some projects and benefited due to real estate prices going northwards.

The liquidity was just too much. It was a classic situation where banks wanted to fund anything which was collateralized by assets and packaged as a product insured by derivatives like CDS.

This is where Investment Banks and their thirst to increase their bottom lines came in to the picture practically. When the Prime Lending saturated, they started to hunt Sub Prime Borrowers and mortgage companies who were specialists in Sub Prime lending (Sub Prime Lending basically means lending to those who do not have a good credit history, with loan and credit card defaults, who otherwise do not qualify for a loan at prime lending rates.)

The sub-prime lending market peaked in 2007 with cumulative lending of more than 1.5 Trillion USD. Most of which was funded by mortgage backed securities sold to or through investment banks to commercial banks worldwide including banks in Europe and Japan. Firms like Lehman leveraged 30 times of their asset base. For every one USD assets, they borrowed 30 USD, and the enormous leverage left hardly any room in case of a fall in real estate prices.

With the bubble bursting in the US real estate market with more and more borrowers failing to repay and refinance their mortgages, the mortgage backed securities which were collateralized started falling in value; the fair value accounting practices becoming the biggest problem for investment and commercial banks.

When the underlying asset starts falling in value, a borrower must top up the margin. Now there were two problems, how to value the asset and how to calculate the Mark-to-Market margins for such securities which always traded privately.

For the first one or two quarters, no one really knew how to price them and how to decide on the losses and write them off the books. Investors faced similar problems in understanding the complexity of the whole thing.

The likes of Merrill, Citi and AIG raised more than 70 Billion USD during the first phase of the crisis.

By the end of phase I, everybody realized it's next to impossible to price them and get the mark-to-market value for them, which means, they're as good as junk and need to be written off 100 per cent, and by doing so firms like Lehman, Merrill and even Morgan had no other choice other than to raise capital or find a merger partner or to go bankrupt! Merrill and Morgan were lucky as the Government came out with a bail-out plan, which if it had come a week earlier, could have saved Lehman.

The crux of the problem was that innovative investment banks created a web of derivative instruments which traded privately in a completely unregulated environment.

Plenty of leverage for all and sundry with no room for errors relying more on instruments like CDS to cover the risk without actual ownership of the asset or knowledge of the credit quality of the borrower was the heart of the problem.

To a great extent the bail-out will help, as it will provide liquidity of non-liquid securities and help banks to get rid of toxic debt paper. It will bring back much needed liquidity in the system, which means banks will start lending again, and that will help stabilize the ailing real estate market.

'Confidence' will be 'Restored' in the 'System' and those seating on cash will start participating again, which in turn will help to stimulate global economy. Sovereign Wealth Funds who are seating on cash because of the commodities boom last year and are on the sidelines will be able to pitch in.

What the bailout plan really offers banks and financial institutions is a window of liquidity to dump the non-liquid mortgage backed securities which are not trading anymore on the Wall Street. The big problem will be how to price such securities which have always trade privately. This is where the banks may lose more, but at least they'll be able to exit such investments and limit their losses.

China has a robust Domestic Capital Market and Institutional mechanism to help the markets recover. The government is pro-active in taking steps to calm investor worries and has enough forex reserves to weather any storm.

USA will go through the pains for one or two more quarters but eventually recover. As the confidence returns to the 'System', the likes of Morgan and Citi will be able to raise capital once again. Most of them will want to off-load part of their toxic debt to Fed but will still want to keep a major part of it on their balance sheet as that's where they can have an upside once the real estate market revives.

As the bail-out plan is valid for two years, most of them who can raise capital and afford to keep these junk on their balance sheet will want to wait for at least 18 months for a real estate market revival which can give them a huge upside as most of them have already taken the hit. Worst case scenario, they can off load everything to Fed before 24 months in case of no revival, but the expectation of revival will fuel a rally in American markets.

European Banks have limited exposure from now on as most of them have already taken huge hits in the past 3 quarters, but the Wall Street bail out plan doesn't offer them anything in particular. Europe will continue to trade in the sidelines.

Japan will go through an interim recession as Japanese banks and institutions are the biggest losers in the present crisis and a tricky political situation and lack of government intervention, will slowdown the pace for lending and credit which will slow down the whole economy.

Emerging Markets will witness a short term rally but investors will want to sell at every level as they're hit the hardest due to lack of liquidity and are also amongst the most thinly traded markets. Investors will use every opportunity to exit from junk and dud stocks from these markets but the bluechips will be favored again. In short there is no hot money chasing the dud and junk stocks anymore. There will be smart money chasing fewer bluechips, which will result into indices going up but won't result into an all-out rally and boom in capital market in emerging countries.

Indonesia is fairly insulated from the present crisis though it's heavily dependent on foreign investors for liquidity in the markets, slow down of foreign investment may impact trading volumes for some time. Coal prices will cool down in short term as demand from India will decrease as financialclosures of major power projects get delayed due to present market conditions, which in turn will depress the commodity driven Jakarta Index.

In short there are no free lunches anymore; we all have to work really hard to make every penny in the market.

Author is Pankaj Shah, Chairman of Earthstone Group, Indonesia. (ANI)

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