Experts have warned that the richly diverse coral reefs of the Coral Triangle around southeast Asia will disappear by the end of the century if action is not taken against climate change. As well as the loss of one of the world’s most diverse underwater ecosystems, the knock on effect would be the collapse of coastal economies that supports around 100 million people, according to the WWF- commissioned study outlined at the World Ocean Conference this week.
The Coral Triangle includes 30 percent of the world’s reefs, 76 percent of global reef building coral species and more than 35 percent of coral reef fish. “In this world, people see the biological treasures of the Coral Triangle destroyed over the course of the century by rapid increases in ocean temperature, acidity and sea level, while the resilience of coastal environments also deteriorates under faltering coastal management. Poverty increases, food security plummets, economies suffer, and coastal people migrate increasingly to urban areas.”

The report concludes that unless we take action to rollback some of the effects of global warming, the direct impact on fishing will cause huge problems to the global fishing economy and impact people who are dependent on fishing as both livelihood and for their food needs, and yet, if one evaluates where we are with trying to roll back emission levels, it is still talk and no action. The Obama administration, for all its talk about making changes in the Bush administration policy of action on global warming, has not taken any concrete action.

So, when it became known that AIG was giving bonuses totalling in the hundreds of millions of dollars to its executives and other key people, and many of them were in fact part of the financial derivatives group within the company that caused the collapse of AIG, there was a huge outcry. Joe Smith, the average guy, was bound to scream and protest, and wanting action from the politicians. The politicians in turn were struck at 2 extremes. Here was a major public pressure to do something, and they were unable to respond because there was apparently legal advice that the bonuses were not revocable, and had to be granted. Politicians, being people with power and a need to showcase that they were in tune with public pressure, immediately crafted a bill that would get these bonuses back through taxes (never mind that many of these same politicians had voted to spend huge amounts of money in pork-barrel projects in the past, such as the Bridge to nowhere in Alaska).
Obama did not come out of this smelling of roses. Obama had come to power with a huge sentiment for him, that here is this young beacon of hope who will change things and take Government away from the usual wheeling-dealing ways and into a new era. However, Obama, like many other politicians, is finding that you can be hit by your own agenda; so, it would seem like that many of his actions were taken in the belief that there will not be much opposition (after all, he is the people’s darling). However, first in the manner of many of his initial nominations of whom some had to back down because of some defect in their past history, and now, in the matter of this AIG stuff, the Obama Administration is struggling.
First, Obama’s treasury secretary, Timothy F. Geithner was criticized for not doing enough to block these bonuses (in all fairness, the guy is up to his neck in trying to turn the economy around, and yet, it would be equally fair to expect him to keep track of any economic issue that could inflame public sentiment); and even more so, he was somewhat dismissive of the scandal initially; it was only later when the pressure started building up very rapidly did Obama start expressing his outrage so that it would seem like that he is also opposing these bonuses to ‘fatcats’. He eventually used his weapon of claiming full responsibility and trying to defuse the situation, a policy that seems to have worked to some extent. However, Obama has to contend with this bill that would add a huge amount of tax to any bonuses for companies that have received money from the Government, and a number of such institutions are opposing any such bill.
One lesson from this episode for Obama would be to not keep on expecting that his popularity will defuse issues; the Republicans are still smarting from the drubbing that they received, and will use any opportunity to highlight issues that could crack the high popularity of Obama.

Libya has paid $1.5bn into a US compensation fund for relatives of victims of terror attacks blamed on Tripoli, the US state department says. The fund was agreed in August to settle remaining lawsuits in the US. The attacks include the 1988 Lockerbie bombing that killed 270 people and the 1986 bombing of a Berlin disco which killed three and wounded more than 200. Under the deal, Libya did not accept responsibility for the attacks, but agreed to compensate victims.
In exchange, President Bush has signed an executive order restoring the Libyan government’s immunity from terror-related lawsuits and dismissing pending compensation cases in the US, the White House said. Relations between Libya and the US improved in 2003 when Tripoli stopped working on weapons of mass destruction. The decision led to the restoration of US diplomatic ties with Libya in 2006.

This coming back into the international community has helped Libya immensely. It has managed to get investors coming back into the country, and it needs these investors for improving the lot of its citizens. These investors include global oil companies that are helping Libya develop its oil fields, and raising the promise of generating huge amounts of revenue from oil and gas, like other oil exporters.

Wachovia Corp. (WB) on Wednesday reported a heavy net loss of $23.7 billion in the third quarter, driven by large one-time charges of $18.8 billion ahead of its planned fourth-quarter merger with Wells Fargo & Co. (WFC). The troubled Charlotte, N.C., bank, whose fate was recently thrown into limbo as it courted two potential suitors, provided ample detail of the crumbling condition that finally pushed it to sell itself. Wachovia’s loss of $11.18 a share marked a steep drop from prior-year net income of $1.62 billion, or 85 cents a share.
Wachovia reported outflows of deposits from both retail and commercial customers, as well as sharply rising losses from its $120 billion portfolio of so-called Pick-A-Pay mortgages. It said total losses from its Pick-A-Pay loans, which allow some borrowers to increase their loans’ balances by paying less- than-full monthly interest payments, could now total 22% of the portfolio.

In a reverse of the phenomenon where retail investors pull their holdings out of the bank if they feel that the bank was in trouble, in this case, it was the businesses who held commercial deposits at the bank who pulled out in the last quarter, while retail investors mostly held onto their deposits. Wachovia currently seems to have hit rock bottom with these huge losses (that include write-offs), and speculation is that things can only improve with the bank from this point (especially with the planned merger with Wells Fargo).

The jitters were prompted by a dismal report on retail sales, a bleak outlook by the Federal Reserve and sober remarks by Fed Chairman Ben Bernanke. A government report showed that retail sales suffered their biggest drop in three years last month. With consumer spending making up two-thirds of GDP, the retail sales data stoked recession fears.
The Federal Reserve’s new snapshot of business conditions showed economic activity weakened across all of the Fed’s 12 regional districts. Separately, Bernanke said the government has all the “tools” it needs to fix the problems in the financial and credit markets. But he cautioned that the recovery will take time.

The economic issues have been rattling the world economy, and the responses have been a bit varied. It is hard to coordinate a response for such a grave economic issue, especially when every country wants to take a decision that is in its best interests. However, finance systems the world over are much more complex and integrated than the decision making. Funds and sentiment are currently moving much faster than individual Governments can respond, and the initiative of a few days back where the finance officials of many countries along with central bankers have been trying to get a common response to these problems. They have so far not managed to improve global sentiment, and are still searching for finding tools that would work to stop this downward spiral of the global economies.
The political scenario in the US, with a heated Presidential election ongoing, has been complicating the overall response to this situation.

- Ordinary citizens worried about being able to payback the loans and repay the mortgage are outraged that no one cares about them, and everybody is instead worried about some Wall Street gents who already have too much money. How does a collapse affect the ordinary Joe on the street ?
1. Tainted assets means that banks are unsure about the value of assets they hold, and make it more difficult for them to estimate their losses; this in turn causes a loss in confidence about the financial status of the bank and prevents the bank from being able to get capital – this in turn will surely and steadily lead to the bank going down the disaster bank
2. It is not just Wall Street that is affected, mainline banks in which Americans hold their deposits, are getting affected
3. The finance sector is so closely integrated with the overall economy (and is in fact a major glue of the whole economy); a crash will bring the economy down to its knees
4. People do not realize, but they are heavily involved with the stock market. Pension funds and retirement plans are typically heavily invested into the market, and downturns in the market affect the overall value of these funds

- Republicans believe that the Government needs to be small,and the market should be free. Such a bailout plan is likely to reverse both of these concepts, and this is a matter of principle
However, right now the US economy is on a major precipice, and it badly needs sentiment to be reflected. The overall aim of any ruling structure is to take measures such that it improves the life and condition of citizens, and the current situation is that a recession needs to be avoided and the economy is brought back from the brink (as stated by any number of economists and finance experts).

However, in a major setback to the President, and to the leadership of both parties, a majority of Congressmen rejected the bill. It is the treasury secretary who is responsible for ensuring that the economy remains purring, and he (and a number of experts) believe that such a plan is necessary to prevent the economy from going into a severe crisis; unfortunately a majority of the elected representatives don’t agree.

Wachovia Corp.’s suitors may use a template honed by JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon last week: Wait to see whether regulators will seize the bank, then buy the best assets and let the government sort out the rest, according to analysts. The bidders may try that tactic again at Charlotte, North Carolina-based Wachovia following its 27 percent plunge in New York trading yesterday, according to analysts at Goldman Sachs Group Inc. and Egan-Jones Ratings Co. They may get help from regulators, who said the U.S. benefited from seizing and selling WaMu because the Federal Deposit Insurance Corp. didn’t have to tap its $45 billion insurance fund.
Wachovia dropped $3.70 to $10 in New York Stock Exchange composite trading yesterday and lost $1.50 more in extended hours. Yields on Wachovia’s bonds soared to 24 percent, from 7.5 percent on Sept. 5, an indication that investors are concerned about default. Analysts questioned Wachovia’s ability to stay independent after seeing loan losses tied to WaMu. JPMorgan is taking on $176 billion in mortgage-related assets and taking writedowns of about $31 billion, the New York bank said. Some of those were option ARM loans, which are prone to default because they let borrowers defer some interest and add it to the principal.

Given that Wachovia also has huge exposures to mortgage loans, other banks are licking their chops at the sidelines, waiting for the Bank to run into more problems, and begin the downward spiral of liquidity problems -> credit problems -> credit rating downgrades -> unable to raise funds. And given the financial deal to take on the massive bad mortgage assets of depressed companies is under active discussion among the politicians, but no immediate solution yet seems to be coming out, sentiment will only go worse.

Once people sensed that these investment firms were in danger, further credit to them was slow in coming, people started withdrawing their investments, and then the credit rating agencies started declaring them as various shades of high-risk, junk status. Once this happened, for all practical purposes, these institutions were finished, with the actual spiral of destruction collapsing very fast. And, now with the Administration and Federal Bank of the USA very worried, they have taken steps to prevent some of the more huge ones:

Federal regulators converted Wall Street’s remaining stand-alone investment banks – Goldman Sachs and Morgan Stanley – into bank holding companies Sunday night. The move allows Goldman and Morgan to scoop up retail banks and to streamline their borrowing from the Federal Reserve. But it also puts Goldman and Morgan under the Fed’s supervision, increasing the agency’s regulatory oversight and possibly forcing them to raise additional capital. As banks, Morgan and Goldman will be forced to take less risk, which will mean fewer profits.
And it brings to a close the era of the Wall Street investment bank, a storied institution that traded stocks and bonds, advised mergers and showered lavish bonuses on its executives. In the past eight days, the federal government announced a $700 billion plan to rescue the financial sector by buying up troubled mortgage assets and an $85 billion emergency loan to insurance titan American International Group. Also, Lehman filed for bankruptcy and Bank of America took over Merrill Lynch.

So, even though both these huge huge firms were not in immediate financial danger, they were sensing that they were in grave danger of running afoul of sentiment. In a scenario where investment banks were automatically assumed to be in danger, neither of these firms would have wanted to be the next company picked up for speculation; once in the target of negative public sentiment, even a profitable investment bank could quickly reach the edge of collapse.
This action goes against the normal distance that the US Government would like to maintain from the private market, but politicians of all shades have realized the extreme danger to the economy, and are willing to run with this. Making these investment firms as companies that will act like normal banks will give far more stability.

American International Group Inc. averted the worst financial collapse in history by accepting an $85 billion federal loan and giving the government a majority stake. The U.S. reversed its opposition to a bailout of AIG, the nation’s biggest insurer by assets, after private efforts failed and the Federal Reserve concluded that “a disorderly failure of AIG could add to already significant levels of financial market fragility,” according to a Fed statement late yesterday.
AIG gives up a 79.9 percent stake to the government and senior managers including Chief Executive Officer Robert Willumstad, 63, will give up their jobs. The two-year revolving loan gives AIG time to sell assets “on an orderly basis,” the New York-based insurer said late yesterday in a statement. The U.S. has the right to discontinue payment of dividends to AIG’s common and preferred stockholders, who are already reeling from a 94 percent drop in common shares this year.

The question that now remains is about which is the next major company that is on the danger list. The Government has already rescued the 2 housing giants, and seen many other major corporations in serious trouble. In many cases, these companies get into trouble since their investments have been massively damaged by the sub-prime credit issues, or since they were holding derivatives that were backed up by these assets. Now, these are worth as much, and downgrades by credit-rating agencies push them down a spiral; they are not able to raise money either through loans or by selling stocks (since stocks have declined in value). This is a downward spiral that takes them down very fast when they are near the end.