How big is the $700 billion financial bailout package for the markets? Big enough that a change in perception as to whether it will pass can overshadow a cut in outlook from industrial and financial powerhouse General Electric.
 
Initially down after GE slashed its quarterly and full-year forecast, Dow Jones futures turned higher in later pre-market trade on optimism that the bailout will go ahead with only minimal friction in Congress. GE CEO Jeffrey Immelt said persistent woes in its finance arms, which account for half of its business, were to blame for the dimmed outlook. 
 
GE stunned Wall Street in April with an unexpected drop in first-quarter profit. It blamed the global credit crunch and the collapse of Bear Stearns for pushing its finance arms lower. These are the businesses at the root of the outlook problems now. At least the market is getting some warning this time — in the spring, GE sprung the bad news on investors in its results statement.
 
GE shares were down early, sagging to $23.50, off more than $1 from Wednesday’s close. If they hit $20.25 they will have lost half of their value since Immelt became CEO. 
 
Given the size and breadth of its financial biz, it would be no surprise to see GE in line for some bailout money. But the company seems to be saying it is fully capable of managing its own problems for now. If the market starts to sense, though, that the profitable parts of GE, the industrial stuff, will be the next shoe to drop in the economic slowdown…look out.

Deals of the day:

* Washington Mutual , the large U.S. savings and loan company beleaguered by mortgage losses, has approached private-equity firms about a potential takeover after a line-up of listed firms showed reluctance, the Wall Street Journal said citing people familiar with the situation

* Hynix Semiconductor said it would sell part of its stake in a Chinese joint venture to partner Numonyx for $100 million, as Numonyx seeks to raise its control over the Hynix-led chip plant.

* South Korea’s antitrust watchdog said it had granted conditional approval for eBay Inc’s plan to buy a controlling stake in South Korean online retailer Gmarket.

* French insurer AXA and Munich Re’s insurance unit ERGO are among the preliminary bidders for a small South Korean life insurer put up for sale, a source at the domestic insurer said.

* China’s Xuzhou Construction Machinery Science & Technology said that it will buy operating assets worth 5.31 billion yuan ($778 million) from its state-run parent via a share placement.

* Grange Resources will merge with Australian Bulk Minerals in an all stock deal to create a A$1 billion ($833 million) mining company, Grange said in a statement.

Will GE meet its lowered profit forecast for 2008?

After a couple weeks of just trying to keep up with developments in the financial crisis, reporters and bloggers are taking halting steps toward describing the mythos of the investment banker.

It’s been a while since Tom Wolfe and Bret Easton Ellis popularized the bespoke-suited arrogance commonly associated with the financial world’s anointed — the easy millions, the casual disdain for the rubes and the marks in the lower classes and the single-minded pursuit of money. Depicting the carnivore in his or her habitat is beginning to come back into vogue as taxpayers who may soon be on the hook to bail out their social betters in the investment banking world wonder why they’re getting stuck with a bill they didn’t incur.

New York magazine ran a story called, “The Rage of the Previously Rich: A Lehman trader copes with the sudden onset of income shrinkage,” featuring this choice nugget:

The collapse of the world’s most powerful wealth-creating engine required everyone to take stock of their financials. One Lehman executive in Rye Brook, fretting about paying off a Hamptons summer house and a ski chalet in Vermont, panicked on Monday morning and laid off her nanny, who had been with the Westchester family for nine years. “The nanny called me crying,” says Marla Sanders, who runs Advance Nannies and staffs Lehman homes. “One of the children she had brought home from the hospital.” Sanders knows more cuts for her clients are on the way. “They’re going to have to sell homes. The question is, will the homes sell? They’re cutting some of the children’s activities out, dance class, acting class. Are they going to have flowers delivered every day to their homes? I don’t think so!”

On Wednesday, ivygateblog featured comments from the pseudonymous “George”:

One of my friends at Bank of America texted me, ‘Hey, we might be buying you guys.’

I was in denial. You see, Merrill has a much better repuation than a commercial bank like Bank of America. I was shocked I would be joining a lower-tier commercial bank. There’s a feeling, ‘I didn’t go through this whole interview process to work at a commercial bank.’

More from George:

Changing compensation will obviously change the attitude of students toward the industry. They might go to med school or law school instead. … This is a sad week. … We may be losing the competitive advantage for getting the best talent.

And finally, regarding the proposed $700 billion bailout plan, courtesy of the United States’s 300 million would-be shareholders of bad debt:

It’s a good step toward stabilizing the turmoil. If the government can take the balance sheet pressure off the companies then the companies will look better going forward.

After all, that’s the only thing that counts in this whole story.

(Photo: Workers leaving Lehman Brothers office in London. Reuters)

Having been laden with the acronym TARP, the Treasury’s Troubled Asset Relief Program sounds like a pretty flimsy rescue operation. Perhaps not since the Committee to Re-Elect the President presaged Richard Nixon’s fall from the presidency have we seen a less confidence-inspiring acronym. A tarp, short for Tarpaulin, is defined by dictionary.com as “a protective covering of canvas or other material waterproofed with tar, paint or wax.” Given the bunker mentality of global financial markets, maybe something more solid could have been equally accurate at describing its function?

You could unload dud investments at a fine, sturdy Bad Asset Repository Network, or head down the road from the Failed Asset Relief Mint, where officials might be able to print up some replacement cash, grown from freshly mowed tax receipts. Then again, if the assets are really bad, perhaps they should just go to the Credit Relief Asset Protection Bailout Insurance Network.

There’s nothing like a belle to bring a festive mood to an otherwise gloomy ball, and today that honor belongs to Goldman Sachs, which has drawn attention – and money – from none other than Warren Buffett.

Stock futures are pointing up on news of the uber-investor’s plan to purchase a $5 billion stake in the bank. And Japanese media say that Sumitomo Mitsui Financial Group is also looking to buy in.

But the fate of the Wall Street bailout plan remains the $700 billion question. Congress is continuing discussions today, with Fed chief Ben Bernanke testifying before the House Financial Services Committee.

At the same time, CNN is reporting that the FBI is investigating potential mortgage fraud at Fannie Mae, Freddie Mac, Lehman Brothers and American International Group – the very companies at the heart of this financial services meltdown.

Oil prices are up ahead of weekly data expected to show the fifth consecutive decline in U.S. crude inventories.

The dollar is down against an index of major currencies. Longer-term U.S. Treasuries are higher.

On a light day for economic reports, we’ve got existing home sales from the National Association of Realtors.

And while we’re on the subject of the housing slump, home-improvement chain Lowe’s says it’s cutting store openings for its next fiscal year.

- Lisa Von Ahn

How big is the $700 billion financial bailout package for the markets? Big enough that a change in perception as to whether it will pass can overshadow a cut in outlook from industrial and financial powerhouse General Electric.
 
Initially down after GE slashed its quarterly and full-year forecast, Dow Jones futures turned higher in later pre-market trade on optimism that the bailout will go ahead with only minimal friction in Congress. GE CEO Jeffrey Immelt said persistent woes in its finance arms, which account for half of its business, were to blame for the dimmed outlook. 
 
GE stunned Wall Street in April with an unexpected drop in first-quarter profit. It blamed the global credit crunch and the collapse of Bear Stearns for pushing its finance arms lower. These are the businesses at the root of the outlook problems now. At least the market is getting some warning this time — in the spring, GE sprung the bad news on investors in its results statement.
 
GE shares were down early, sagging to $23.50, off more than $1 from Wednesday’s close. If they hit $20.25 they will have lost half of their value since Immelt became CEO. 
 
Given the size and breadth of its financial biz, it would be no surprise to see GE in line for some bailout money. But the company seems to be saying it is fully capable of managing its own problems for now. If the market starts to sense, though, that the profitable parts of GE, the industrial stuff, will be the next shoe to drop in the economic slowdown…look out.

Deals of the day:

* Washington Mutual , the large U.S. savings and loan company beleaguered by mortgage losses, has approached private-equity firms about a potential takeover after a line-up of listed firms showed reluctance, the Wall Street Journal said citing people familiar with the situation

* Hynix Semiconductor said it would sell part of its stake in a Chinese joint venture to partner Numonyx for $100 million, as Numonyx seeks to raise its control over the Hynix-led chip plant.

* South Korea’s antitrust watchdog said it had granted conditional approval for eBay Inc’s plan to buy a controlling stake in South Korean online retailer Gmarket.

* French insurer AXA and Munich Re’s insurance unit ERGO are among the preliminary bidders for a small South Korean life insurer put up for sale, a source at the domestic insurer said.

* China’s Xuzhou Construction Machinery Science & Technology said that it will buy operating assets worth 5.31 billion yuan ($778 million) from its state-run parent via a share placement.

* Grange Resources will merge with Australian Bulk Minerals in an all stock deal to create a A$1 billion ($833 million) mining company, Grange said in a statement.

Will GE meet its lowered profit forecast for 2008?

After a couple weeks of just trying to keep up with developments in the financial crisis, reporters and bloggers are taking halting steps toward describing the mythos of the investment banker.

It’s been a while since Tom Wolfe and Bret Easton Ellis popularized the bespoke-suited arrogance commonly associated with the financial world’s anointed — the easy millions, the casual disdain for the rubes and the marks in the lower classes and the single-minded pursuit of money. Depicting the carnivore in his or her habitat is beginning to come back into vogue as taxpayers who may soon be on the hook to bail out their social betters in the investment banking world wonder why they’re getting stuck with a bill they didn’t incur.

New York magazine ran a story called, “The Rage of the Previously Rich: A Lehman trader copes with the sudden onset of income shrinkage,” featuring this choice nugget:

The collapse of the world’s most powerful wealth-creating engine required everyone to take stock of their financials. One Lehman executive in Rye Brook, fretting about paying off a Hamptons summer house and a ski chalet in Vermont, panicked on Monday morning and laid off her nanny, who had been with the Westchester family for nine years. “The nanny called me crying,” says Marla Sanders, who runs Advance Nannies and staffs Lehman homes. “One of the children she had brought home from the hospital.” Sanders knows more cuts for her clients are on the way. “They’re going to have to sell homes. The question is, will the homes sell? They’re cutting some of the children’s activities out, dance class, acting class. Are they going to have flowers delivered every day to their homes? I don’t think so!”

On Wednesday, ivygateblog featured comments from the pseudonymous “George”:

One of my friends at Bank of America texted me, ‘Hey, we might be buying you guys.’

I was in denial. You see, Merrill has a much better repuation than a commercial bank like Bank of America. I was shocked I would be joining a lower-tier commercial bank. There’s a feeling, ‘I didn’t go through this whole interview process to work at a commercial bank.’

More from George:

Changing compensation will obviously change the attitude of students toward the industry. They might go to med school or law school instead. … This is a sad week. … We may be losing the competitive advantage for getting the best talent.

And finally, regarding the proposed $700 billion bailout plan, courtesy of the United States’s 300 million would-be shareholders of bad debt:

It’s a good step toward stabilizing the turmoil. If the government can take the balance sheet pressure off the companies then the companies will look better going forward.

After all, that’s the only thing that counts in this whole story.

(Photo: Workers leaving Lehman Brothers office in London. Reuters)

Having been laden with the acronym TARP, the Treasury’s Troubled Asset Relief Program sounds like a pretty flimsy rescue operation. Perhaps not since the Committee to Re-Elect the President presaged Richard Nixon’s fall from the presidency have we seen a less confidence-inspiring acronym. A tarp, short for Tarpaulin, is defined by dictionary.com as “a protective covering of canvas or other material waterproofed with tar, paint or wax.” Given the bunker mentality of global financial markets, maybe something more solid could have been equally accurate at describing its function?

You could unload dud investments at a fine, sturdy Bad Asset Repository Network, or head down the road from the Failed Asset Relief Mint, where officials might be able to print up some replacement cash, grown from freshly mowed tax receipts. Then again, if the assets are really bad, perhaps they should just go to the Credit Relief Asset Protection Bailout Insurance Network.

There’s nothing like a belle to bring a festive mood to an otherwise gloomy ball, and today that honor belongs to Goldman Sachs, which has drawn attention – and money – from none other than Warren Buffett.

Stock futures are pointing up on news of the uber-investor’s plan to purchase a $5 billion stake in the bank. And Japanese media say that Sumitomo Mitsui Financial Group is also looking to buy in.

But the fate of the Wall Street bailout plan remains the $700 billion question. Congress is continuing discussions today, with Fed chief Ben Bernanke testifying before the House Financial Services Committee.

At the same time, CNN is reporting that the FBI is investigating potential mortgage fraud at Fannie Mae, Freddie Mac, Lehman Brothers and American International Group – the very companies at the heart of this financial services meltdown.

Oil prices are up ahead of weekly data expected to show the fifth consecutive decline in U.S. crude inventories.

The dollar is down against an index of major currencies. Longer-term U.S. Treasuries are higher.

On a light day for economic reports, we’ve got existing home sales from the National Association of Realtors.

And while we’re on the subject of the housing slump, home-improvement chain Lowe’s says it’s cutting store openings for its next fiscal year.

- Lisa Von Ahn