Neel Kashkari

Economic data posted today shows the Consumer Price Index posted its largest drop in 61 years! Thats gotta hurt! The 'Big 3' continue their desperate pleas for financial assistance from the government today in an attempt to ward off bankruptcy. Recently the automakers have indicated that should they be allowed to fail, there could be a loss of jobs in the millions. Realistically, this is not correct which has been pointed out by Congressional leaders, during the bailout hearings. The selloff increased into the closing bell with the major U.S. indices closing at or near their lows of the trading session.

Interim Assistant Secretary Neel Kashkari Remarks on Implementation of the Emergency Economic Stabilization Act - Washington: Good afternoon. Thank you, Faith, for that kind introduction. I have really enjoyed working with you over the past year. You are doing an excellent job leading HOPE NOW, getting servicers who are fierce competitors by day, to work together and with counselors toward the common goal of foreclosure prevention. The organization of Women in Housing and Finance is fortunate to have you as their President-Elect. It is an honor for me to be here. Rather than give a long, formal speech, I would like to use this unique opportunity to do something a little different. I would like to give you a brief overview of our response to the credit crisis, and then spend most of the time taking your questions and having a thoughtful discussion. The Treasury, the Federal Reserve and regulators in the U.S. and abroad have taken numerous unprecedented actions since the beginning of the crisis to reduce systemic risk and stabilize financial markets. Throughout the crisis, we have been strongly encouraging financial institutions to raise capital and to recognize losses. We have worked hard to adapt our policies to the rapidly changing circumstances on the ground. Secretary Paulson and Chairman Bernanke recognized early that there may come a time when the private markets would become unwilling to provide the necessary capital to our financial system to deal with the large expected losses from the housing correction. In such a scenario, only the Federal government would be in a position to support the financial system – to step in to provide the needed capital to prevent collapse. Government intervention was not our first choice, as it often has unintended, far-reaching consequences. We evaluated numerous alternatives and focused on a program to buy illiquid mortgage assets in very large scale to attract private capital to recapitalize our financial system. We all hoped it would not come to this, but recognized the possibility and began contingency planning in early 2008. In late summer, after the failure of Bear Stearns, the crisis intensified and our financial institutions came under even more pressure from deteriorating market conditions and the loss of confidence. In a very short period of time, some of our largest financial institutions failed or changed structure. In July, IndyMac bank failed. In the month of September alone, we witnessed the following: conservatorship of Fannie Mae and Freddie Mac, the sale of Merrill Lynch to Bank of America, the bankruptcy of Lehman Brothers, the rescue of AIG by the Fed, the conversion to bank holding companies by Morgan Stanley and Goldman Sachs, the distressed sale of Wachovia, and the failure of Washington Mutual. As a result, in September, credit markets effectively froze. The commercial paper market shut down, 3-month Treasuries dipped below zero, and a money market mutual fund "broke the buck" for only the second time in history, precipitating a $200 billion net outflow of funds from that market. Recognizing the threat to our financial system, Secretary Paulson and Chairman Bernanke knew the time had come and on September 18, they went to the Congress to ask for unprecedented authority to prevent a collapse of our financial system. Congress recognized the threat that frozen credit markets pose to the economy and to every American. Just two weeks later, on October 3, the Congress passed and President Bush signed into law the Emergency Economic Stabilization Act of 2008. We worked hard with the Congress to build tremendous flexibility into the legislation because the one constant throughout the credit crisis has been its unpredictability. In our discussions with the Congress, we focused on our initial plan to purchase illiquid mortgage assets. In the two weeks between the time we submitted the draft legislation and the time the bill passed, credit markets deteriorated more quickly than we had expected. One key measure we looked at was LIBOR-OIS spread – a measure of perceived credit risk in the financial system. Typically, 5 – 10 basis points, on September 1, the one month spread was 47 basis points. By the 18th, when we first went to Congress, the spread had climbed 88 basis points to 135 basis points. By the time the bill passed, just two week later on October 3, the spread had climbed another 128 basis points to 263 basis points. It was clear to Secretary Paulson and Chairman Bernanke, we needed to use the authority and flexibility granted under the EESA as aggressively as possible to quickly stabilize the system. We began immediately designing a capital program in addition to our asset purchase programs. We believed that purchasing equity in healthy banks would be the fastest way to inject much-needed capital into the financial system and restore confidence, which would restore the flow of credit. Illiquid asset purchases, which would take longer to implement, would follow. Meanwhile, credit markets continued to deteriorate. On October 10, LIBOR-OIS spread had risen another 75 basis points to 338 basis points. So, four days later, on October 14, when our Capital Purchase Program was ready, we announced a plan to invest up to $250 billion in banks and savings institutions of all sizes, in combination with a guarantee of senior bank debt by the FDIC. These combined actions were taken to prevent a collapse of the financial system. We believe these actions were successful. At the same time, we continued working hard on our illiquid asset purchase programs. We were keenly aware that, while $700 billion is a large sum of money, it is a finite amount. We needed to use the available funds to provide the maximum benefit to the system, while leaving enough dry powder to deal with contingencies. Throughout the process, we carefully monitored how the markets were responding to our actions and conditions in the broader economy. We asked ourselves: Would banks apply for the capital? Would credit markets respond? What was happening in the economy? We were pleased that healthy banks of all sizes were signing up for the capital program and credit markets were showing signs of thawing. But the economic indicators were less positive. On October 31, data on third quarter GDP showed negative 0.3 percent growth. In addition, data released on October 28 showed that through August, home prices in 10 major cities had fallen 18 percent over the previous year. It became clear we may need additional capital for both banks and non-bank financial institutions. To prevent the collapse of the financial system, we also had to restructure the Federal Reserve's loan to AIG, using $40 billion of TARP funds. With about half the original $700 billion available for asset purchases, would such a program still be the best approach? For an asset purchase program to be effective, it must be done in very large scale. While we have taken actions to stabilize the banking sector, supporting the non-banking market is also important to helping consumers, businesses and our economy get the credit they need. The consumer securitization market appears to be a promising opportunity. This would help bring down rates of auto loans, credit cards and student loans and could be achieved with a more modest allocation from the TARP. And although we are not currently planning to initiate another capital program beyond those already announced, an emphasis on additional capital seems to us to be an appropriate focus today. The EESA is not an economic stimulus plan, nor is it an economic growth plan. It was designed to stabilize the financial system. Today, the LIBOR-OIS spread has fallen 238 basis points from its peak to 100 basis points. We believe the combined actions of Treasury, the Federal Reserve and FDIC have stabilized the financial system and prevented a financial collapse. Nonetheless, the current crisis took years to build up and will take time to work through, and we still face some real economic challenges. We will remain focused on ensuring the stability of the financial system and have begun working with our successors as we transition to the next Administration. With that brief overview, I would be happy to take your questions.

Economic data released today:

Consumer Price Index:
U.S. October Consumer Prices fell 1.0 percent as compared to consensus of a drop by 0.8 percent; U.S. October CPI Excluding-Food & Energy fell 0.1 percent as compared to consensus of an increase by 0.1 percent; U.S. October CPI Unrounded fell 0.961 percent; U.S. October CPI Core fell 0.071 percent; U.S. October CPI Energy Prices fell 8.6 percent; U.S. October CPI Food Prices increased by 0.3 percent; U.S. Real Average Weekly Earnings increased by 1.4 percent during October.

Housing Starts:
U.S. October Housing Starts fell 4.5 percent to 791,000 as compared to consensus of a drop by 4.7 percent; Building Permits fell 12.0 percent to 708,000 Rate in October; September Housing Starts Revised to a drop by 3.0 percent from a drop by 6.3 percent.

FOMC Minutes:
FOMC Minutes Signal Fed open to more rate cuts; Economy to contract in second half 2008, first half 2009; Inflation likely to diminish in coming quarters.

At the NYSE closing bell on the New York Stock Exchange, here is how the major world indices and major U.S. stock indices ended the trading session on the world markets as well as the emerging markets including the stock market closing bell price:
DOW (Dow Jones Industrial Average) triple digit loss of 427.55 points to end the trading session at 7,997.20
NYSE (New York Stock Exchange) triple digit loss of 353.66 points to end the trading session at 5,012.00
National Association of Securities Dealers Automated Quotations (NASDAQ) loss of 96.85 points to end the trading session at 1,386.42
S&P 500 (SPX) loss of 52.49 points to end the trading session at 806.63
FTSE All-World Index data excluding U.S. (AW01UK) loss of 5.78 points to end the trading session at 132.71
FTSE RAFI 1000 triple digit loss of 203.75 points to end the trading session at 3,065.85
BEL 20 (BEL20) loss of 85.66 points to end the trading session at 1,945.30
CAC 40 (CAC40) triple digit loss of 129.51 points to end the trading session at 3,087.89
FTSE100 (UKX100) triple digit loss of 203.75 points to end the trading session at 4,005.68
NIKKEI 225 (NIK/O) loss of 55.19 points to end the trading session at 8,273.22

New York Stock Exchange (NYSE) stock market indicators for the trading session today:
Advanced stock prices 214, declined stock prices 3,000; unchanged stock prices 39; stock prices hitting new highs 3 and stock prices hitting new lows 849. NYSE quotes for volatile stocks and market trends, as well as stock quotes, stock prices and stock symbols of Day Trading Stock Picks on the New York Stock Exchange stock market for Day Trading online and active Day Trading for those who are or would like to be Day Trading for a living: Best Buy Company Incorporated (NYSE: BBY) stock price shed 2.39 points on the trading session, high on the trading session $20.54, low on the trading session $17.52 with a closing stock price at $18.58; Philips-Van Heusen Corporation (NYSE: PVH) stock price shed 0.51 points on the trading session, high on the trading session $18.10, low on the trading session $15.00 with a closing stock price at $15.00; Genesco Incorporated (NYSE: GCO) stock price shed 6.22 points on the trading session, high on the trading session $15.99, low on the trading session $10.80 with a closing stock price at $11.40; Royal Caribbean Cruises Limited (NYSE: RCL) stock price shed 1.65 points on the trading session, high on the trading session $9.45, low on the trading session $7.78 with a closing stock price at $7.85; Ultrashort Financial ProShares Corporation (NYSE: SKF) stock price gained 39.24 points on the trading session, high on the trading session $226.45, low on the trading session $186.31 with a closing stock price at $222.83; Goldman Sachs Group Incorporated (NYSE: GS) stock price shed 6.85 points on the trading session, high on the trading session $63.45, low on the trading session $54.54 with a closing stock price at $55.18; Sunoco Incorporated (NYSE: SUN) stock price shed 4.83 points on the trading session, high on the trading session $36.14, low on the trading session $32.00 with a closing stock price at $33.20; ProShares UltraShort MidCap400 (NYSE: MZZ) stock price gained 17.15 points on the trading session, high on the trading session $131.33, low on the trading session $112.33 with a closing stock price at $131.05; CME Group Incorporated (NYSE: CME) stock price shed 15.58 points on the trading session, high on the trading session $188.44, low on the trading session $170.88 with a closing stock price at $171.33; SL Green Realty Corporation (NYSE: SLG) stock price shed 6.33 points on the trading session, high on the trading session $23.20, low on the trading session $16.22 with a closing stock price at $17.73; Rio Tinto (NYSE: RTP) stock price shed 15.69 points on the trading session, high on the trading session $147.71, low on the trading session $129.90 with a closing stock price at $129.90.

National Association of Securities Dealers Automated Quotations (NASDAQ) stock market indicators for the trading session today:
Advanced stock prices 325; declined stock prices 2,571; unchanged stock prices 101; stock prices hitting new highs 3 stock prices hitting new lows 823. NASDAQ quotes, volatile stocks and market trends, as well as stock quotes, stock prices and stock symbols of Day Trading Stock Picks on the NASDAQ stock market for Day Trading online and active Day Trading for those who are or would like to be Day Trading for a living: Insteel Industries Incorporated (NasdaqGS: IIIN) stock price gained 0.06 points on the trading session, high on the trading session $8.33, low on the trading session $7.61 with a closing stock price at $7.70; First Solar Incorporated (NasdaqGS: FSLR) stock price shed 8.91 points on the trading session, high on the trading session $107.40, low on the trading session $100.00 with a closing stock price at $101.65; Baidu.com Incorporated (NasdaqGS: BIDU) stock price shed 16.76 points on the trading session, high on the trading session $133.22, low on the trading session $111.00 with a closing stock price at $112.00.

Market trends on the American Stock Exchange (AMEX) and stock market indicators for the trading session today:
Advanced stock prices 197; declined stock prices 609; unchanged stock prices 69; stock prices hitting new highs 2 and stock prices hitting new lows 132.

Chicago Board of Trade Futures Market activity for the day, at time of this posting for December 2008 Contracts:
E-mini S&P 500 (ES) end of trading session price 862.50. 57.75
E-mini NASDAQ-100 (NQ) end of trading session price 1,166.75, -85.75
E-mini DOW $5 (YM) end of trading session price 7,995 -499
E-mini S&P MidCap 400 end of trading session price 451.50, change 8.50
E-mini S&P SmallCap 600 (SMP) end of trading session price 222.40. -18.10

World Currencies for the Forex Market, for Forex Trading by active Forex Traders, at time of this posting:
Euro 0.7989 to U.S. Dollars 1.2517
Japanese Yen 95.790 to U.S. Dollars 0.0104
British Pound 0.6680 to U.S. Dollars 1.4971
Canadian Dollar 1.2536 to U.S. Dollars 0.7977
Swiss Franc 1.2120 to U.S. Dollars 0.8251

Commodity Markets:
Energy Sector: Light Crude (NYMEX: NYM) shed $0.77 on the trading session for a closing price of $53.62 a barrel ($US per barrel)
Heating Oil (NYMEX: NYM) no change on the trading session for a closing price of $1.77 a gallon ($US per gallon)
Natural Gas (NYMEX: NYM) gained $0.21 on the trading session for a closing price of $6.81 per million BTU ($US per mmbtu.)
Unleaded Gas (NYMEX: NYM) shed $0.03 on the trading session for a closing price of $1.11 a gallon ($US per gallon) 

Metals Markets:
Gold Market Price (COMEX: CMX) gained $3.30 on the trading session for a closing price of $736.00 ($US per Troy ounce)
Silver (COMEX: CMX) shed $0.24 on the trading session for a closing price of $9.31 ($US per Troy ounce)
Platinum (NYMEX: NYM) shed $13.30 on the trading session for a closing price of $823.70 ($US per Troy ounce)
Copper (COMEX: CMX) shed $0.06 on the trading session for a closing price of $1.61 ($US per pound) 

Livestock and Meat Markets (cents per lb.):
Lean Hogs (Chicago Mercantile Exchange: CME) gained 0.70 on the trading session for a closing price of 62.90
Pork Bellies (Chicago Mercantile Exchange: CME) gained 0.10 on the trading session for a closing price of 84.60
Live Cattle (Chicago Mercantile Exchange: CME) shed 2.45 on the trading session for a closing price of 85.15
Feeder Cattle (Chicago Mercantile Exchange: CME) shed 1.40 on the trading session for a closing price of 89.85 

Other Commodities (cents per bushel):
Corn (Chicago Board of Trade: CBT) shed 1.00 on the trading session for a closing price of 395.50
Soybeans (Chicago Board of Trade: CBT) shed 4.50 on the trading session for a closing price of 898.00

Bond Market:.
2 year bond gained 4/32 on the trading session for a closing price of 100 26/32 with a Yield of 1.08, Yield Change -0.05
5 year bond gained 21/32 on the trading session for a closing price of 103 16/32 with a Yield of 2.05, Yield Change -0.14
10 year bond gained 1 16/32 on the trading session for a closing price of 103 9/32 with a Yield of 3.35, Yield Change -0.18
30 year bond gained 2 31/32 on the trading session for a closing price of 109 16/32 with a Yield of 3.94, Yield Change -0.16

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