9/188:28 News & Notes

RCM Comments: These stories are all Gold bullish.

News:

Federal aid to Detroit seems likely - NY Times
NY Times reports after a series of government interventions in the private markets, one seemingly more astonishing than the next, lawmakers found themselves confronted on Wednesday with the question of when and where to draw the line on future aid. But with billions of dollars in financial backing already authorized for Wall Street, and with Election Day fast approaching, Congressional leaders seemed uninterested in denying help to large employers of blue-collar Americans. Even as lawmakers in both parties unleashed a barrage of questions about the wisdom of a government rescue for the American International Group, support seemed to be growing quickly on Capitol Hill for $25 billion in loan guarantees to assist the ailing auto industry. Both presidential candidates, Senator John McCain of Arizona and Senator Barack Obama of Illinois, have voiced support for the loan guarantees — an unsurprising stance given the critical importance of the main auto-producing states, Michigan and Ohio, to the electoral map this fall. The chief executives of the three big American automakers — General Motors (FM), Ford (F) and Chrysler — met on Wednesday afternoon with House Speaker Nancy Pelosi. When they emerged, they expressed optimism that the loan guarantees would be included as part of a budget resolution that is needed to finance government operations through the end of the year.

Fed says adds $50.00 bln of temporary reserves to banking system via overnight repo -
Reuters

Equity futures are higher with Fed announcing additional actions to improve liquidity, new SEC rules against short-selling in effect
Equity futures are trading higher this morning after the Federal Reserve announced coordinated actions with a number of other central banks to improve liquidity. The Bank of Canada, the Bank of England, the European Central Bank (ECB), the Federal Reserve, the Bank of Japan, and the Swiss National Bank engaged in a coordinated effort to address the continued elevated pressures in U.S. dollar short-term funding markets. The measures are designed to improve the liquidity conditions in global financial markets, with the FOMC authorizing a $180 bln expansion of its temporary reciprocal currency arrangements (swap lines). In addition to helping equity futures, these actions have also led to a decline in the overnight Libor rate to 3.84% from 5.0% yesterday and 6.43% the day before. This signals an easing of immediate liquidity concerns, demonstrating that banks are more willing to lend to one another overnight. There are also headlines this morning about the TED spread, which measures the difference between three month U.S. Treasuries contract and three month Libor, as it has widened further to 3.13% (Bloomberg is reporting this is the highest since at least 1984). The widening of the TED Spread indicates that banks are still less willing to lend for a longer time period. The dollar has also weakened on this news... Another factor playing into today's market is the SEC's new rules to protect against naked shorting, which have gone into effect today. The SEC enacted these rules out of concern about the possible unnecessary or artificial price movements based on unfounded rumors regarding the stability of financial institutions and other issuers exacerbated by "naked" short selling. The new rules include the following: 1) a penalty on any participant of a registered clearing agency, and any broker-dealer from which it receives trades for clearance and settlement, for having a fail to deliver position at a registered clearing agency in any equity security; 2) elimination of the options market maker exception from Regulation SHO's close-out requirement; and 3) a "naked" short selling antifraud rule... Dow futures are +94 pts, S&P futures are now +14 pts, Nasdaq +20.