The White House has said the USD 819 billion mega economic stimulus package, passed by the House of Representatives amid opposition from Republicans, is on track and exuded confidence it would be signed into law before February 16, a deadline set by President Barack Obama.

The American Economic Recovery and Reinvestment Act, which pumps USD 819 billion into the US market so as to boot up its fast sinking economy, was passed by the House early this week; with all Republicans lawmakers voting against it.

The stimulus package is now scheduled to come up before the Senate next week, wherein the opposition Republicans, though in minority, have vowed to block it. They have, in fact, brought out their own version of the bill.

Obama’s presidential rival, Senator John McCain, yesterday announced that he is working on an alternative package.

White House spokesman, Robert Gibbs, hoped that it would be cleared by the Senate next week and soon it would be on the President’s desk.

“I don’t think next week we’ll see any delay. I think we’re on a path towards getting the President something that he can sign before President’s Day (February 16) recess,” he said.

Obama wants countries to act on economic crisis: White House

US President Barack Obama wants all nations including India, to act in unison in dealing with the current global economic crisis, the White House has said.
Obama is expected to come up with a more specific plan in this regard in the run up to the next G-20 meeting in London in April, the White House spokesperson Robert Gibbs said.

On a question that G-20 is not moving anywhere and that several countries are complaining that BRIC Brazil, Russia, India and China have not been included in the Financial Stability Forum, Gibbs said “India is a member of G-20.” “Well, I think what the President talked about this when he was a mere Senator and a candidate, that if one entity takes steps and it’s not followed by other countries taking steps — be it regulation, stability or stimulus — you’re most likely to see capital flows, change all around the world. We certainly saw candidate Obama talked about that in September,” Gibbs said.

“The President talked about it back in September, working together in unison, all of these countries. I think you’ll hear more about some of those specific plans as we lead to and get closer to going into April to the second round of this in Europe,” he said. PTI

Insurance companies Tata-AIG and Oriental Insurance will take a major hit on account of damage to the properties suffered at iconic Taj and Oberoi-Trident during the terrorist violence that ended earlier in the day.
Both the five-star hotels, which witnessed major casualties and excessive property loss during the past three days, were insured against terrorism and hence the insurance companies will have to bear the burden towards reconstructing and refurbishing the damaged hotels.

Although the extent of damage to hotels is yet to be ascertained, industry sources said, while Tata-AIG General Insurance Company was the lead insurer in case of Taj hotel, the Oberoi-Trident was insured with a consortium led by state-owned Oriental Insurance Company.

Besides the cost of reconstructing the damaged properties, the insurers will also have to compensate the owners for loss of business.

Apart from the lead insurer, in case of Taj Hotel 30 per cent insurance cover was provided by ICICI Lombard and 5 per cent by Iffco-Tokio General Insurance. Part of insurance cover in case of Oberoi-Trident was provided by Chennai-based United India Insurance.

Terrorism cover in the country is offered by general insurance companies through a common pool which presently has a corpus of about Rs 1,000 crore.

The terrorism cover, which comes along with with the fire insurance, takes care of material losses on account of terrorism activities.

For premium of Rs 1,000 the policy holder is required to pay additional Rs 0.25 for terrorism cover, said Optima Risk Management Director Rahul Aggarwal.

Read more about Mumbai Terror Attacks - People are looking for answers..

My heart aches as I write this blog entry and I feel angry and helpless at the same time witnessing the events that were unfolded in last forty eight hours. Mumbai — the city of dreams, — the city that doesnt sleep, — the economic capital of India came to a standstill and we witnessed one of the most dreaded nightmare in its history.

I am a Delhihite and have been to Mumbai on few occasions and have even stayed for more than a month and was always amazed by the city in some way or another. It pains to see the events unfolding on news channel..to see the gory acts…to see the Taj hotel or the Nariman House or the Oberoi turning into a battle ground…to see hundreds wounded and killed be it women, children, aged But this isnt specifically about Mumbai. This attack is on our Country…India.

I wonder what wrong did we or our so called past leaders do in the past to attract so much hatred from our neighbours that they can go to an extent of killing themselves to harm us. Is it only about Kashmir…or it is about a war between Hindus and Muslims or they cant seetheir neighbours progessing unlike them??? I still wonder…. aimlessly without any result….what went wrong and where…?? Whatever we have learnt…or have been taught…I feel we Indians have always restrained ourselves..be it in 1947 when the POK (Pakistan Occupied Kashmir was born) or be it in 1971 when we drove the enemy to the Lahore or Be it during Kargil when we again restrained crossing the LOC. Is it that our restraint has been taken as weakness??? Why is it that we are the ones who have to bear the burnt again and again. First a series of blasts in Gujrat…then again the same in Delhi and then in Assam. If the enemy is man enough, why dont they come to the border and fight like MEN.

I felt cheated when after my schooling i came to know that POK wasnt a part of our motherland…because in our school days the MAP of INDIA that was taught to us did not show it as POK but showed it as a part unified India which is a fact far from reality.

Nevertheless…i dont want to ventilate my anger by writing a blog entry …forwarding few e-mails or by forwarding few SMSs. I guess thats what we do all the time and then forget few days later and then get back to our routine and name it the ‘Sprit of Mumbai’ or ‘Spirit of Delhi’. We take proud in the fact that we are back to normal within a day and are unfazed by what happened. But I ask you…what option do we have??? A Common man has to come out of his house to earn his bread and butter. He cannot stay at home forever because of fear….he has to out sooner or later. It is our so called ‘MAJBOORI’ that is termed by our unfazed spirit by the media or the Govt…but if you ask me…i myself dont have an option. Infact i told my wife today that you never know it would be me next…in some bus or some metro train….or may be at a shopping mall..and who knows……might be you as well…

Comming to think of it again….I wonder where was my dear Raj Thakeray…and his bunch of goons who were driving north Indians out of Mumbai…I didnt see him in any of the news channels trying to drive these terorist out?? Wonder why were North Indian NSG commandos were summoned to do the act….Didnt the MNS goons and Raj Thackeray volunteer to get rid of the terrorist….?? Oh…i forgot …the terorists were carrying bombs and granades…and AK-47s…and you might have got killed…isnt it Raj Baba?? so your So called Vanar Sena is good only for poor biharis??? right???

Every such act is a question for us to reply….its high time we start doing that… but wonder when would that happen. When nothing happened even after the Parliament was attacked (Afzal is yet to be hanged…it takes us 7 years to decide a killers fate…shame!!) it is not likely to happen ever. Yet, the way optimistic I am, I would realy like to see India taking a stand like US after the World Trade Centre Incident. I guess that is when we such acts can be replied to. This reminds me of a recent movie - ‘A wednesday’ which tells us that some day or the other every one has to take a stand.

And the problem is not only India centric. Our neighbours are also getting a does of thier own medicine in recent times. The entire world is plagued by terorism. Be it America or Europe or Asia. Its time we all unite in or fight against terorism and show make these cowards reach thier desired destiny. I dont know how would that happen…but wonder how much i wish it does….

Something horrible is happened in Mumbai. 120 people are dead and 250 injured in a coordinated series of attacks on luxury hotels, train stations, and tourist attractions in India’s financial capital - Mumbai. At least seven sites were struck. And the death toll could easily climb much higher. 60 lifeless bodies and over 200 injured people were brought to a single hospital, according to DNA Mumbai.

Watch MUMBAI TERROR ATTACK uncovered and detailed in special report by CNN IBN.

Watch this video where eyewitness Phillip Badje was in one of the hotels attacked by terrorists in the city of Mumbai, India. Maggie Rodriguez talks to Badje about his experience.

Terrorists “armed with AK-47 rifles and grenades” stormed the “passenger hall” of Mumbai’s Chhatrapathi Shivaji Terminus (CST) train station. They “and opened fire and threw grenades,” according to Mumbai General Railway Police Commissioner A. K. Sharma. 30 people were injured.

Above picture illustrates the operation where an Indian National Security Guard commando abseils from a helicopter onto the rooftop of Nariman House at Colaba Market. (Picture courtesy The Telegraph and Getty)

These are the important places attacked by terrorists:

Chhatrapati Shivaji Terminus - Shooting
Leopold Cafe, Colaba - Shooting
Hotel Taj Mahal Palace & Tower - Shooting and 6 bomb explosions, Fire on top floor, hostages
Hotel Trident Oberoi - Shooting, explosions
Mazagaon Docks Explosion
Vile Parle suburb, North Mumbai - Explosions
Cama Hospital- Shooting, Hostages Taken
JW Marriot, Juhu -Shooting - Explosion

“A little-known group, the Deccan Mujahideen, has claimed responsibility,” the AP reports. The strikes “come after a series of blasts attributed to Islamist terrorists over the summer and autumn in other cities around India,” the Wall Street Journal notes.

Firing was also reported at Cama Hospital in south Mumbai, police said, adding that a blast was reported in a taxi under a flyover in suburban Vile Parle,” the paper says. Three persons were killed in a bomb explosion in a taxi on Mazegaon dockyard road and an equal number were gunned down at [the] Taj Hotel.

Bellboys could be seen rushing the injured out on luggage trolleys, according to DNA Mumbai. The victims included three senior police officers, including the head of [the state's] anti-terror squad, the Wall Street Journal reports.

More bloodshed could come from the Taj attack. The gun-toting terrorists who hit the landmark hotel also took 15 people, half of them foreigners, hostage on the roof of the luxury Taj Hotel, an escaped hostage tells the Times of India. The attackers, men in their early 20’s, honed in on anyone with British or American passports, an eyewitness said.

Survivors of the attack on the Oberoi hotel told a similar story. A British restaurant-goer tells Sky News television that “the attackers were singling out Britons and Americans.”

Read more reactions round the world where people condemned this attack as one of the most vicious terror attack since 9/11 and 7/7.

- Mumbai Attacks: Terrorism has no Religion. An excellent coverage by Langar Hall, provides insights on terrorism linked with religion. If you read the comments you will find that people are really concerned about the issue.

- Mumbai Terror Attack Escalates Tensions Between India, Pakistan. Steve Herman from Voice of America write exclusively about the chill in relations between the two nuclear-armed neighbors comes as commandos in Mumbai launched their final assaults on three sites.

- ‘Everyone’s taking cover now’: reporting the Mumbai terror attacks. The Guardian UK published an interesting story: “After news of the Mumbai terror outrage broke, how did news agencies cover the rapidly unfolding events?”

Ever wondered what is the value of 500 Rs for different people in today’s world ? Watch this video and judge yourself. An Interesting movie found at you tube. Think before you spend!

Who hasn’t heard the name ICICI? The world famous Industrial Credit and Investment Corporation of India (ICICI) Bank, recently had a tough time dealing with the unexpected rumors, spread all over the market, pin pointing the financial condition of the bank.

Although, it’s the largest Private sector bank- in market capitalization, and second largest overall in terms of assets in India, still there were malicious rumors related to its financial health in the domestic market.

ICICI Bank has total assets of about USD 100 Billion (end-Mar 2008), as the new reduced cash reserve ratio is implemented the bank has an additional liquidity of more than Rs 2,500 crore. Rumors about the withdrawal of the UK insurance business partner, Prudential PLC was at a height on Friday.

When the sensex is declining steeply, then, it’s next to impossible that any company resists itself at an upper level, and therefore, ICICI was no exception on 8th and 10th October, as the sensex slipped down to 366.80 and 800 respectively on Wednesday and Friday.

Actually, all the depositors were so tensed on seeing the gradual decline in the share market, that, when the rumors stating the “bad” condition of such a dynamic bank came out, then, people were in no state to think as they had already lost a lot of money and therefore, they just wanted to save as much money as they can.

Some statements were also released by the MD Chandra Kochhar in which she mentioned that, the Bank has given loans against strong assets. On Sunday the Bank officials have taken some strict actions against the brokers and websites that ultimately created these ‘good for nothing’ rumors.

Since many years, the Bank has been showing upward trends which even lead Credit Rating Agencies like Standard & Poor’s and Moody, to say that, there are no sub-prime risks even in the overseas branches. Some measures have also been taken by the government, to show its confidence in the bank like the government asked its companies to increase their deposits in the bank.

But, despite these rumors, the bank is now again set with all the speculations settled down. The bank has definitely shown that, it cannot be affected adversely under any circumstances.

What so ever may be the reason for this crisis, but, right now, the first requirement is to join hands and make the situation better, because all of us are in the same position and have a common fear.

Every human being from a small investor to a company’s director or some minister, each and every single person is bearing the cost of the present global crisis- in some way or the other. In order to control this tragic condition from becoming even worse the American Federal Reserve and European Central Bank have reduced their interest rates to the greatest extent possible.

But, America and Europe are not the only ones who have taken such drastic decisions; instead, there are 4 more countries- Canada, Sweden, England and Switzerland, which lie in the list of the ‘worst hit nations.’

All the major Banks of the world like Bank of England, Federal Reserve, European Central Bank, Bank of Canada, took the emergency decision and have reduced there interest rates and made it half from there original values.

Amongst the Asian countries Japan and China are the ones that have been affected to the greater extent, although, the stock markets and the Banks of the other Asian countries like India have also been affected, but, the effect is not as drastic as in the above mentioned nations.

In India, the Reserve Bank of India has reduced the interest rates several times to provide liquidity into the market. The various steps taken by the different countries indicate that, the Central Banks across the globe are trying their best to- save the reputation of their respective counties by providing funds to the banks and trying to prevent their economy from declining further.

The Central Banks which haven’t reduced their interest rate since many years are also left with no other option, but, to cut down their CRR. So, now the benchmark rate of Federal Reserve is just 1.5% and that of the European Central Bank is 3.75%.

Similar is the case of other Banks belonging to countries like- Britain, Sweden, Canada; which had reduced their interest rates to 4.5%, 4.25% and 2.5%. The Bank of England will make at least £200 billion available. In last three weeks, China has reduced its interest rate twice, and right now its 6.93%.

Bank of Japan is trying to handle this unexpected situation by removing certain restrictions that were applied earlier, but, it hasn’t reduced the CRR nor has it announced anything of that sort.

The economy of each and every country is getting weaker and weaker with every passing day and any step taken by the individual governments are all failing one after the other. As the share markets are declining day by day, people have started considering gold to be the safest avenue and therefore, every single person is investing in commodity now days.

Read Financial Crisis Part 1: “An Overall view of the Global market”
Financial Crisis Part 2: Major Steps taken by RBI to deal with the present crisis.

A perfect storm had hit the world, so, how can India be indifferent to it? The impact of the crisis is so vast that, even the Finance minister had to cancel his scheduled trip to Washington.

According to a spokesperson, the decision was made, so that, government could prepare to unleash some more measures and encourage capital in flows into the market and ultimately prevent the liquidity crisis from hitting the Indian Financial System.

Now, the largest State-owned Bank, State bank of India, has come into action, earlier the SBI has launched a new special 1,000 day Fixed Deposit scheme. This was done in order to witness large inflow of money in the sector and that’s what actually happened, and in just 12 working days a sum of more then 5,000 corers came in.

Today, not even a single investor is left who doesn’t sweat on hearing the business related news. In the starting first five months there was a slow growth rate of 4.9% which itself represented the worst financial period in last 14 years, barring 1998 and 2001.

The rupee fell to a lifetime low of 49.26 against the US dollar in morning trade on 10th October before recovering to close at 48.47 on intervention by the Reserve Bank of India and sale of the greenback by local banks and exporters.

The fall in the rupee was due to the stock market crash on the sale of shares by foreign institutional investors (FIIs). This was the ninth week in a row when the rupee fell and a similar losing streak was last seen before June 2005.

Some efforts were required to be made in order to control the Indian market and therefore, the Reserve Bank of India (RBI) had again and again announced reduction in the cash reserve ratio (CRR), or the proportion of deposits that banks set aside, to inject more liquidity into the system.

In this month itself RBI has reduced the CRR three times, firstly a 50 basic points cut on 6th October, then, a 100 basic points cut on 11th October and finally on 15th October again a 100 points cut was made. In June 2003 CRR was lowered by 25 basis points to 4.50 per cent, but, since then no further cut down has been made by RBI.

The 150 basis point reduction is the steepest since 2001. The International stock markets and money markets have also been adversely affected in a significant manner, therefore, like RBI the Central banks across the world have responded to these extraordinary developments by synchronized policy actions including measures for liquidity infusion.

Please read previous part “An Overall view of the Global market” here.

Effects of the global financial crisis have already precipitated at each and every corner of the world. Alarm bells had already ranged, when Bush administration was considering taking ownership stakes in certain US banks by passing $700 billion bailout as an option to deal with a severe global credit crisis.

If we take a look as to- what exactly is the point of origin of this major crisis? Actually the fact is that, US banks gave heavy loans to the Lower income US-households with clearly no sources of return.

As these housing loans turned “bad,” therefore, the instruments that were based on these loans lost there values, slowly and steadily giving rise to the ultimate crisis. Gradual falling prices dented the banks and destroyed there capital.

The losses are really unpredictable, as, no one has any clue about how big these dents are and which banks lie in the list of the hardest hit. All these circumstances had lead RBI to take over Central Bank for the first time in five years, and also announce CRR cuts.

Although, the panic in the market can also be related to the busting of the strongest Lehman Brothers, which had survived every major upheaval since last 158 years. Speculations related to the finances of ICICI bank, also reached to a height on 10th October, as the bank plunged over 25%, but, as the top officials released their statements- assuring the safety of the depositor’s money, it generated little peace in the market.

The fears of a global recession mounted after- Dow fell 678 points to close at 8,579 on last Friday, its first close below 9,000 since June 2003. Therefore, the investors are dumping risky assets like shares and rushing to the safest avenue GOLD, as the currencies and stock markets across the world are falling steeply. This has lead to an upshot in the global investment community, which has now become extremely risky avenue.

If we look at the past records, the financial crisis come to an end as suddenly as it started, but, the wounds are sharp which always take a long time to heal up. If we cut the long story in short, then it’ll be enough to say that the sensex concluded the worst week in its history, scheduling almost 2,000 points, wiping out investor wealth worth Rs. 6.6 lakhs crore in just four trading sessions.

An extract from ET, in case anyone has not read:

Leftists claim that the global financial crisis was caused by reckless deregulation and greed. Rightists blame half-baked financial regulations and perverse incentives. Actually, the financial sector is deeply regulated, with major roles for both the state and markets. It was not one or the other that failed but the combination.

The best metaphor for the mess comes from Jack and Suzy Welch, who recall Agatha Christie’s Murder on the Orient Express. In this novel, 12 people are suspects in a murder. And 12 turn out to be guilty. What starts as a whodunit concludes as an everybody-dun-it. In the same spirit, allow me to present the 12 murderers of the US financial system.

The Federal Reserve Board

Alan Greenspan, Fed Governor in 1987-2006, was once hailed as a genius for keeping the US booming, but is now called a serial bubble-maker. He presided over bubbles in housing, credit, and stock markets. He said it was difficult to identify asset bubbles in advance, so anti-bubble policies might be anti-growth. It was better to let bubbles build, and sweep up after they burst. Bernanke, like Greenspan, ignored the US housing bubble till it burst.

US politicians

Envisioning a home for every American, regardless of income, they provided excess implicit and explicit housing subsidies. One law forced banks to lend to subprime poor borrowers. Legislators created Fannie Mae and Freddie Mac, government-sponsored entities that bought or underwrote 80% of all US mortgages, and enjoyed exemption from normal regulations. Politicians ignored Greenspan’s warning that such a dominant role for two under-regulated giants posed a huge financial risk.

Fannie Mae and Freddie Mac

They resisted regulation, and spent over $2 million lobbying legislators against any tightening of rules. As mortgagers of last resort they should have been especially prudent. But they bought stacks of toxic mortgage paper — collateralised debt obligations (CDOs) — seeking short-term profits that ultimately led to bankruptcy.

Financial innovators

Their ideas provided cheap, easy credit, and helped stoke the global economic boom of 2003-08. Securitisation of mortgages provided an avalanche of capital for banks and mortgage companies to lend afresh. Unfortunately the new instruments were so complex that not even bankers realised their full risks.

CDOs smuggled BBB mortgages into AAA securities, leaving investors with huge quantities of down-rated paper when the housing bubble burst. Financial innovators created credit default swaps (CDSs), which insured bonds against default. CDS issues swelled to a mind-boggling $60 trillion. When markets fell and defaults widened, those holding CDSs faced disaster.

Regulators

All major countries had regulators for banking, insurance and financial/ stock markets. These were asleep at the wheel. No insurance regulator sought to check the runaway growth of the CDS market, or impose normal regulatory checks like capital adequacy. No financial regulator saw or checked the inherent risks in complex derivatives. Leftists today demand more regulations, but these will not thwart the next crisis if regulators stay asleep.

Banks and mortgage lenders

Instead of keeping mortgages on their own books, lenders packaged these into securities and sold them. So, they no longer had incentives to thoroughly check the creditworthiness of borrowers. Lending norms were constantly eased. Ultimately, banks were giving loans to people with no verification of income, jobs or assets. Some banks offered teaser loans — low starting interest rates, which reset at much higher levels in later years — to lure unsuspecting borrowers.

Investment banks

Once, these institutions provided financial services such as underwriting, wealth management, and assistance with IPOs and mergers and acquisition. But more recently they began using borrowed money — with leverage of up to 30 times — to trade on their own account. Deservedly, all five top investment banks have disappeared. Lehman Brothers is bust, Bear Stearns and Merrill Lynch have been acquired by banks, and Morgan Stanley and Goldman Sachs have been converted into regular banks.

Rating agencies

Moody’s and Standard and Poor’s were not tough or alert enough to spot the rise in risk as leverage skyrocketed. They allowed BBB mortgages to be laundered into AAA mortgages through CDOs.

The Basel rules for banks

These international negotiated norms provided harmonised regulatory checks on financial excesses across countries. The first set of norms, Basel-I, was widely criticised as too rigid and blunt. So countries agreed on Basel-II, which allowed banks to use credit ratings and models based on historical record to lower the risk-ratings of many securities. This dilution of norms led to excesses everywhere. Iceland’s banks went bust holding loans/securities totalling 10 times its GDP. The dilution of risk-rating in Basel-II helped inflate the financial bubble.

US Consumers

Their savings used to be 6% of disposable income some time ago, but more recently has been zero or even negative. They have gone on a huge borrowing spree to spend far more than they earn. This excess is reflected in huge, unsustainable US trade deficits.

Asian and OPEC countries

They undervalued their currencies to stimulate exports and create large trade surpluses with the US. They accumulated trillions in forex reserves, and put these mostly into dollar securities. This depressed US interest rates, and further fuelled borrowing there.

Everybody

Consumers, corporations, banks, politicians, the media — indeed everybody — was happy when housing prices boomed, stock markets boomed, and credit became cheap and easily available. Bubbles in all these areas grew in full public view. They were highlighted by analysts, but nobody wanted to stop the lovely party. Everybody liked easy money and rising asset prices. This trumped prudence across countries.

So, forget the Left-versus-Right or regulations-versus-markets debate on the financial crisis. States, institutions, markets and everybody else was guilty.

These actors will for some years don sackcloth and ashes, adopt stiffer regulations, and listen to lectures on the virtues of prudence and restraint. But after seven-to-ten years of the next business upswing, I predict that we will once again have a new generation of bubbles, evading whatever new checks have been put in place. When everybody loves bubbles, they are both irresistible and inevitable.

Source: Economic Times