CYAN MAGENTA - PDF document

CYAN MAGENTA MYK CompositeP2JW25905B-5-A00100-10000F7FFFF*****AZ,EE,MW,SC,SW,WEBG,BM,CH,CK,DA,DE,DM,DN,FW,HL,HW,LG,NA,NM,OR,PA,RI,RO,SB,SH,TU,UT,WO588674109/15/2008P2JW25905B-5-A00100-10000F7FFFF 7 7 CrisisonWallStreetasLehmanTotters,MerrillIsSold,AIGSeekstoRaiseCashFedWillExpandItsLendingArsenalinaBidtoCalmMarkets;MovesCapaMomentousWeekendforAmericanFinance ByJamesHookwayBANGKOK—ForaglimpseintothefutureoffortunetellinginThailand,payavisittoLuckRakhanithes.AtMr.Luck’splush,three-storyBangkokof-fices,ateamoftele-phoneoperatorsguidesanxiouscallersthroughthechaosofeverydaylife.Somelearnwhattheirprospectsareforsecuringasuitablelovematchorawell-payingjob.Othersaregivenauspiciousdatesforstartinganewbusi-ness.At36yearsold,Mr.Luckispartofanewgenerationofbusi-ness-savvyseersturningthean-cientartofastrologyintobigbusiness.He’saprime-timefix-tureonThaitelevisionforwav-ingaredflagwhenheis100%cer-tainabouthispredictions(awhiteflaggoesupwhenhe’slesssure).Hesellsabout300,000booksayear,hesays,thankstoadistributiondealwiththelocaloperatorofthe7-Elevenconve-nience-storechain.AsThailandcomestogripswithtwoyearsofpoliticalunrest—in-cludingacoup,deadlyriotsand,lastweek,acourtrulingforcingtheprimeministertostepdownforhostingatele-visioncookingshow—thecountryhaslappedupMr.Luck’sconfidentforecasts.“Everytimethere’sacrisisinThailand,it’saglorioustimeforastrologers,”Mr.Lucksays.It’salltoomuchforsomeintheoldguard,whosepredictionstendtobevaguerandmoreinkeepingwiththeancienttradi-tionsofseershere.Theseastrolo-PleaseturntopageA17OneofthemosttumultuousweekendsinWallStreet’shis-torybeganFriday,whenfederalofficialsdecidedtodeliveraso-beringmessagetothecaptainsoffinance:TherewouldbenogovernmentbailoutofLehmanBrothersHoldingsInc.OfficialswantedtopreparethemarketforthepossibilitythatLehmancouldsimplyfail.Thebestwaytodothatinanor-derlywaywouldbetogetevery-onetogetherinaroom.TreasurySecretaryHenryPaulson,FederalReserveChair-manBenBernankeandhistopNewYorklieutenant,TimothyGeithner,summonedsome30WallStreetexecutivesfora6p.m.FridaymeetingattheFed’sofficesinLowerManhattan.“Thereisnopoliticalwillforafederalbailout,”Mr.Geithnertoldtheassembledexecutives,accord-ingtoapersonfamiliarwiththematter.“Comebackinthemorningandbepreparedtodosomething.”Overthenext48hours,thesemarchingordersdevelopedintoanerve-wrackingtestoftheabil-ityoftheU.S.financialsystemtoholditselftogetheramidtheworstseriesofshocksithasfacedindecades.Bytakingtherescueoptionoffthetable,theU.S.governmentwasdeclaringthattherearelim-itstoitsroleasbackstop-in-chief.AweekearlierithadseizedmortgagegiantsFannieMaeandFreddieMac,andmonthspriorhadbrokeredthesaleofBearStearns&Co.toJ.P.MorganChase&Co.Butnow,WashingtonappearstowantWallStreettolargelyfixitsownproblems,andfeelsthatflailinginstitutionsshouldn’texpectthegovernmenttocommitmoneytosavethem.“We’vere-established‘moralhazard,’”saidapersonin-volvedinthetalks,referringtoPleaseturntopageA19 BankofAmericatoBuyMerrillUltimatumByPaulsonSparkedFranticEndPoliticalTurmoilinThailandBoostsBusinessforAstrologersMr.LuckAutomatesFortunetelling;SomeRivalsWantIndustryRegulationCopyright2008DowJones&Company.AllRightsReserved Lastweek:DJIA201.031.8%NASDAQ12214.76unch.DJSTOXX5010-YRTREASURY20/32,yield3.730% 7 7 WhatsNews… CONTENTSCampaign08..A5,6,8CorporateNews..B2,3Health..B4HeardontheStreet..C8InternationalFinance..C6LetterstoEditor..A22Managing..B4Media&Marketing..B5Opinion..A21-23Technology..B4WeatherWatch..B8WhosNews..B5WorldNews.A10,14,17Business&FinanceMerrillLynchCEOJohnThainleavingtheFederalReserveBankofNewYorkSaturday,whereU.S.officialsandWallStreetexecutivesmettodiscusstheturmoilfacingU.S.financialinstitutions.MorecoverageonC1,C3andC8.TheAmericanfinancialsys-temwasshakentoitscoreonSunday.LehmanBrothersHold-ingsInc.facedtheprospectofliquidation,andMerrillLynch&Co.agreedtobesoldtoBankofAmericaCorp.TheU.S.government,whichbailedoutFannieMaeandFred-dieMacaweekagoandorches-tratedthesaleofBearStearnsCos.toJ.P.MorganChase&Co.inMarch,playedmuchtougherwithLehman.Itrefusedtopro-videafinancialbackstoptopo-tentialbuyers.Withoutsuchsupport,Bar-claysPLCandBankofAmerica,thetwomostinterestedbuy-ers,walkedaway.OnSundaynight,BankofAmericastruckanall-stockdealtobuyMerrillLynchfor$29ashare,or$50billion.Lehmanwasworkingonapossiblebankruptcyfilingthatwouldallowmostofitssubsidiariestocontinueoperat-ingasthefirmiswounddown.Thoughitsteeredclearofabailout,theFederalReserveisexpectedtotakenewstepstostabilizethebroaderfinancialsystem.Thesesteps,expectedtobetemporary,wouldmakeiteasierforbanksandsecuritiesfirmstoborrowfromthecen-tralbankbyusingawiderrangeofcollateral.Bankerssaythesefinancialinstitutionsmightneedshort-termfundsastheyunwindtheirmanytrad-ingpositionswithLehman.Inaddition,10majorcom-mercialandinvestmentbanksannouncedSundaynightthattheywouldpool$70billionoftheirownmoneytocreateaborrowingfacility.The10insti-tutions,whichincludeCiti-groupInc.,CreditSuisseGroup,DeutscheBankAG,couldtapthepooltohelpthemrideoutthecrisis.Thebanksalsosaidtheyaremutu-allycommittedtotryingtomitigatemarketvolatility.AsenseofforebodinggrippedWallStreetastopexec-utivesfearedcollateraldam-agefromaLehmanliquidation.AttentionwasfocusedonMer-rillLynch,whichboaststhelargestforceofretailbrokers,andAmericanInternationalGroupInc.,theinsurancegi-ant.Bothfirmshaveseentheirstocksgethammeredonwor-riesthattheyneededcapital.“Mondaywillbeadayofreckoningforthefinancialmar-kets,”saidCarlosMendez,se-niormanagingdirectorofICPCapital,aboutiqueinvestmentfirminNewYork.OnSunday,hesaid,“itwaslikeafirealarmwentoffandpeopleraninalldi-rections.”AIGexecutivesspenttheweekendtryingtoraise$40billiontoavoidacostlydown-gradeofitscreditrating.AIGChiefExecutiveRobertWillum-stadmadeanextraordinaryap-pealtotheFedfortemporaryfundingtotideitthroughthecrisis.(Pleaseseerelatedarti-cleonPageC1.)AsworriesspreadacrossWallStreetthatLehmanwouldn’tsurvive,brokeragefirms,hedgefundsandothertradersmovedtodisentanglethemselvesfromtradeswithLehman.Whenhopesofapo-tentialsaledimmed,aquietSundayonWallStreetturnedintoamadrush.Executivesandtradershurriedtotheirof-ficesorworkedtheirphonestounwindoutstandingcon-tractswithLehmanandtogaugetheiroverallexposure.Merrill,whosebrokerageforceisknownasthe“thunder-ingherd,”enteredintodiscus-sionswithBankofAmerica,whichhasretailbankbranchesstretchingfromcoasttocoastandhaslongcovetedMerrill.WallStreetexecutivessaidtheFederalReservemayhavebeeninvolvedinorchestratingthesale,figuringthatitwas“bet-tertosavetherelativelyPleaseturntopageA18World-WideIkeleftatrailofdamagefromTexastoLouisiana.Destructionfromthehurri-canecouldsqueezeenergysuppliesandstrikeablowtothestrongregionaleconomy.Morethan2.5millionhomesandbusinesseslostpower.Despiteabroadevacuationeffort,tensofthousandsre-fusedtoleavetheirhomes.ThirteenpeoplewerereporteddeadbySunday.GulfCoastoilrefineriesappearedtohaveescapedmajordamage,butpowerproblemspreventedmanyfromreturningtoservice.TheNTSBwastryingdeterminethecauseofacommuter-traincrashinaLosAngelessuburbFriday.Thetrainbarreledintoanoncomingfreighttrain,and25peoplewerekilled.Thewreckhighlightstheabsenceofkeysafetyequipmentonthenation’srailnetwork.InNewDelhi,bombingspopularshoppingareasonSaturdaykilled21.ThefiveblastsfollowedthreesimilarattacksthathavehitothercitiessinceMay.Obamaraisedarecord$66millionfromdonorsinAugust,butthemoneyracebetweenhimandMcCainislikelytobetighterthanmanyoriginallythought.AplanecrashinRussiakilledall88peopleonboard.OfficialssaidtheBoeing737-500,operatedbyanAeroflotunit,wascirclingin“difficultweatherconditions”whenitlostdispatchercontact.A17RussiantroopsbeganpullingbackfromwesternGeorgiacheckpoints,partofanEU-brokeredpeacedeal,butanewbattleloomsoverinternationalaccesstoRussia-backedseparatistregions.A14Bolivia’sMoralesagreedtotalksoveraclashwithopposition-ledprovinces,afterpoliticalviolencekilledasmanyas30lastweek.A17Pakistanisecurityforceskilled16suspectedmilitantsinatribalregionborderingAf-ghanistan,thelatestroundofamilitaryoffensivewithnoendinsight,officialssaid. CarrickMollenkampSusanneCraigSerenaNgAaronLucchetti DeborahSolomonDennisK.BermanSusanneCraigCarrickMollenkamp Associated Press 2008 102030405060$70 0102030405060$70 2008Source: WSJ Market Data Group YEAR-TO-DATEYEAR-TO-DATEYEAR-TO-DATEFriday’s close: $12.14Friday’s close: $17.05Friday’s close: $3.65 ByMatthewKarnitschnig,CarrickMollenkamp AndDanFitzpatrickInarushedbidtorideoutthestormsweepingAmericanfi-nance,94-year-oldMerrillLynch&Co.agreedlateSundaytosellit-selftoBankofAmericaCorp.for$50billion.Thedeal,workedoutin48hoursoffreneticnegotiating,couldinstantlyreshapetheU.S.bankinglandscape,makingthenation’sprimebehemothevenbigger.LateSundaynight,thecompanies’boardshadap-provedthedeal,butlawyerswerenegotiatingoverlast-minutedetails.DrivenbyChiefExecutiveKennethLewis,BankofAmericahasalreadymadedozensofac-quisitionslargeandsmall,in-cludingthepurchaseofailingmortgagelenderCountrywideFi-nancialCorp.earlierthisyear.InaddingMerrillLynch,itwouldcontrolthenation’slargestforceofstockbrokersaswellasawell-regardedinvestmentbank.Thecombination,ifapprovedbyshareholders,wouldcreateabankofvastreach,involvedinnearlyeverynookandcrannyofthefinancialsystem,fromcreditcardsandautoloanstobondandstockunderwriting,mergerad-viceandwealthmanagement.Throughtheweekend,federalofficials,includingFederalRe-serveBankofNewYorkheadTimo-thyGeithner,madeitclearthattheystronglyencouragedadealtosellMerrill.TheyworriedthefirmcouldbethenexttoapproachthebrinkoffailureafterLehmanBrothersHoldingsInc.,saidpeo-plefamiliarwiththematter.Theall-stockdealcameto-getherquickly.WithMerrillstockdroppingsharplylastweek,MerrillPresidentGregoryFleming,aformerfinancial-insti-tutionsadviser,urgedMerrillChiefExecutiveJohnThaintoPleaseturntopageA19AssociatedPressehmanfacesthepossibil-ityofliquidation,andMerrillLynchagreedtobesoldtoBankofAmericaina$50billiondealonSunday,adayinwhichtheU.S.finan-cialsystemwasshakentoitscore.TheFederalReserveisexpectedtotakenewstepstostabilizethebroaderfinan-cialsystem.Meanwhile,AIGsoughttoraisecashandcraftasurvivalplanamidinvestorpressure.A1,A18,A19,C1,C2RegulatorsandinvestorsprepareforMondayasLeh-man’scollapse,anAIGdealandtalksbetweenBankofAmericaandMerrillcouldrattleinvestors.OilfuturespushedSundayevenafterHurricaneIkeforcedshutdownsofGulfCoastrefineriesandplat-forms.Crudefell$2.09,or2.1%,to$99.09abarrel.Exitpackagesforthede-posedCEOsofFannieMaeandFreddieMachighlightaweaklinkineffortstolinkex-ecutivepaywithperform-ance:severancedeals.CharlesPrince,formerCiti-groupchairmanandCEO,hasanewjob:usinghiscontactstodrumupbusinessforaWash-ingtonconsultingfirm.ElectronicArtsdroppeditsbidforTake-Two,hintingitsinabilitytogetadealbytheholidayseasonwasafactor.Chinaintroducedahigh-levelcommissiontooverseeenforcementofitsnewanti-trustlegislation,whichisfac-ingatestfromCoca-Cola.SiriusXM’sCEOdetailedhisplanforaddressingthecompany’sdebtandprovingsatelliteradio’spotential.GMonTuesdayaimsunveiltheChevroletVolt,itsbattery-poweredcarsettohitthemarketby2011.ThelengtheningleadJapan’sautomakersholdinsecuringbatteriesforthenextgenerationofcarshasbecomearallyingpointfortheU.S.autoindustry.TheWalgreen-CVSrivalryenteredamoreheatedstagewithWalgreen’s$75-a-sharebidforLongsDrugStores. � Pleasehelpthevictimsofthousandsofdisastersacrossthecountryeachyear,disastersliketherecenthurricanes,bymakingafinancialgifttotheAmericanRedCrossDisasterReliefFund.ThisfundenablestheRedCrosstoprovideshelter,food,counselingandotherassistancetovictimsofdisasters.GIVETODAY:1-800-REDCROSSVisitredcross.orgDisasterVictimsNeedFood,ShelterandCounseling. YouCanHelp. TheAmericanRedCrosshonorsdonorintent.Ifyouwishtodesignateyourdonationtoaspeci“cdisaster,call1-800-REDCROSS.ThisspacegenerouslydonatedbyExxonMobil. *****MONDAY,SEPTEMBER15,2008VOL.CCLIINO.64$2.00