PARIS (AP) — When French shoppers start cutting back on buying champagne, oysters and foie gras for New Year’s, it’s been a rough year.

As Europe prepared to ring in 2009, many revelers said belt-tightening was their top New Year’s resolution. The vow followed the most volatile financial year in decades, a time that saw stock markets melt around the world and hundreds of thousands of workers lose their jobs.

Even shoppers in the affluent area west of Paris were scaling back purchases for the traditional New Year’s Eve feast.

“We’re not going to celebrate in a big way — we’re being careful,” said architect Moussa Siham, 24. “We will be eating fish for New Year’s dinner.”

Sydney was the world’s first major city to ring in 2009, showering its shimmering harbor with a kaleidoscope of light that drew cheers from more than a million people.

Spectator Randolph King, 63, of York, England, whose retirement fund was gutted in the global financial crisis, summed up the feeling of many as 2008 came to a close.

“I’m looking forward to 2009,” he said. “Because it can’t get much worse.”

Partygoers everywhere struggled to forget their troubles.

In Ireland, thousands of Dubliners and tourists gathered outside the capital’s oldest medieval cathedral, Christ Church, to hear the traditional New Year’s Eve bell-ringing.

“It is a wondrously beautiful note on which to end what, for many people, has been an awfully out-of-tune 2008,” said Gary Maguire, a volunteer pulling the ropes.

On Dublin’s north side, Danny McCoy, a recently laid-off construction worker, mulled over his waning fortunes as he got his hair cut at the Drumcondra Barber Shop.

“Last New Year’s I had a fat wallet. I didn’t have to worry about paying for my round, never mind the taxi fare home,” he said. “Tonight I’ve a mind to keep the festivities close to home, because I can’t really afford to do anything.”

London Mayor Boris Johnson rejected defeatism in a New Year’s message projected on the wall of the Shell Building.

“There are those who say we should look ahead to 2009 with foreboding,” Johnson said.

“I want to quote Col. Kilgore in ‘Apocalypse Now’ when he says ‘Someday captain, this war is going to end’; and someday, this recession is going to end,” he added. “Let’s go forward into 2009 with enthusiasm and purpose.”

But Johnson’s words may fall on deaf ears. A poll commissioned by the British Web sitehttp://www.gocompare.com found that Britons were preoccupied with their sinking finances. Some 48 percent intended to reduce or eliminate debt for their New Year’s resolution, and 42 percent planned to cut spending, according to the survey by Loudhouse Research.

In Malaysia, the government — mindful of the shaky economy — opted against sponsoring any celebration at all.

In Hong Kong, where thousands thronged to popular Victoria Harbor for a midnight fireworks display, those who had investments linked to collapsed U.S. bank Lehman Brothers said there was little joy to be found.

“I don’t think there’s any reason for me to celebrate after knowing that my investment is worth nothing now,” said electrical repairman Chan Hon-ming, who had purchased a $30,000 Lehman-backed investment.

In India, many were happy to see the end of 2008, after a series of terrorist attacks in several cities, culminating in a three-day siege in Mumbai in which gunmen killed 164 people.

“The year 2008 can best be described as a year of crime, terrorist activities, bloodshed and accidents,” said Tavishi Srivastava, 51, an office worker in the northern city of Lucknow. “I sincerely hope that 2009 will be a year of peace and progress.”

At midnight in Japan, temples rang their bells 108 times — representing the 108 evils being struck out — as worshippers threw coins as offerings and prayed. In Tokyo, volunteers stirred huge pots of New Year’s rice-cake soup, pitched tents and doled out blankets and clothing to the needy.

Japan has long boasted a system of lifetime employment at major companies, but that has unraveled this year amid the financial crisis.

“There’s no work,” muttered Mitsuo Kobayashi, 61, as he picked up a wool scarf, a coat and pants. “Who knows what next year will bring?”

In Thailand, after protests paralyzed the government for months, the country was finally calm on the last day of 2008 as loyalists of ousted ex-Prime Minister Thaksin Shinawatra took off for a five-day national holiday. Many protesters come from Thailand’s rural northeast and can only get home on longer holidays.

Celebrations were muted in China, where fireworks and feasting are reserved mainly for the Lunar New Year, which in 2009 begins on Jan. 26.

In Beijing, President Hu Jintao summed up the year’s challenges and successes, ranging from the devastating Sichuan earthquake — that left nearly 90,000 people dead or missing — to the Beijing Olympics, calling 2008 extraordinary and unusual.

In the Philippines, President Gloria Macapagal Arroyo looked toward the future.

“I pray for greater peace and stability,” Arroyo said. “I hope that we can all work together as a global community to weather these storms.”

Associated Press writers Dheepti Namasivay in Paris, France, Shawn Pogatchnik in Dublin, Ireland, Robert Barr in London, England, Denis Gray in Bangkok, Thailand, Dikky Sinn in Hong Kong, China, Jim Gomez in Manila, Philippines, Eileen Ng in Kuala Lumpur, Malaysia, Biswajeet Banerjee in Lucknow, India, and Yuri Kageyama in Tokyo, Japan, contributed to this story.

By Lukanyo Mnyanda

Dec. 31 (Bloomberg) — The cost of borrowing in dollars in London for three months dropped for the third day, ending 2008 at the lowest level in more than four years as policy makers provide cash and lower interest rates.

The London interbank offered rate, or Libor, for such loans fell one basis point to 143 basis points, the least since June 8, 2004, according to British Bankers’ Association data. Singapore’s comparable rate for U.S. funds slipped one basis point today to 1.44 percent, the lowest level since June 2004. The Libor-OIS spread, a measure of cash scarcity, narrowed.

“There’s no reason for the easing in rates not to continue,” said David Keeble, head of fixed-income strategy in London at Calyon, the investment-banking unit of Credit Agricole SA. “The banking sector is more stable and cash is coming into the system.”

Policy makers in the U.S., Europe and Asia have lowered interest rates to revive lending after credit-related losses at financial firms topped $1 trillion and pushed America, Europe and Japan into the first simultaneous recessions since World War II. The Federal Reserve reduced its target rate to as low as zero on Dec. 16 and the Bank of Japan followed on Dec. 19 with a reduction in its benchmark to 0.1 percent from 0.3 percent and China also cut rates.

The three-month dollar rate was still 118 basis points above the 0.25 percent upper end of the Fed target, compared with an average of 12 basis points in the year before the credit crisis began in August 2007.

The euro interbank offered rate, or Euribor, that banks say they charge each other for three-month loans fell to 2.89 percent, the lowest level since May 17, 2006, according to data from the European Banking Federation.

The Libor-OIS spread, a gauge favored by former Fed Chairman Alan Greenspan, narrowed one basis point to 125 basis points today. The TED spread, the difference between what the U.S. government and banks pay to borrow for three months, dropped two basis points to 133 basis points. That’s two basis points lower than on Sept. 12, the last working day before Lehman Brothers Holdings Inc. collapsed.

Libor, the benchmark for $360 trillion of financial products worldwide, is set by a panel of banks in a survey by the BBA and is typically published before noon each day in London.

To contact the reporter on this story: Lukanyo Mnyanda in London atlmnyanda@bloomberg.net

The agency reportedly plans to unload IndyMac to group of private equity and hedge fund firms. Questions remain as to whether its aggressive loan modification plan will continue.

NEW YORK, Dec 29 (Reuters) – New York state could receive at least $5 billion in direct aid from President-elect Barack Obama’s planned stimulus package, helping to shrink a historic budget deficit, according to U.S. Sen. Charles Schumer.

The stimulus package is expected to include $80 billion to $100 billion in additional funding to localities and states for Medicaid, the federal health care funding program for the poor, the elderly and the disabled, Schumer said in a statement.

The package will also include money for infrastructure projects, said the statement, which was released ahead of a news conference scheduled for Monday.

“New York’s (Medicaid) matching rate could be temporarily increased by approximately 10 percent — resulting in at least $5 billion a year,” said the statement.

“This money would be injected directly into the state coffers and could help defray budget cuts and future tax hikes,” the New York Democrat said.

New York is facing a record $15.4 billion deficit over the next 15 months.

Congress is mulling two different approaches to the Medicaid issue, an across-the-board increase for all states or a tiered approach. In either scenario, New York stands to benefit, said Schumer.

The senator is working with Obama’s transition team to work out the details of the stimulus package.

The New York Metropolitan Transportation Authority, which is also grappling with a record deficit of about $1.2 billion, is expected to benefit from hundreds of millions of dollars in emergency funding for maintenance and upgrades, Schumer said at a news conference on Sunday.

The senator and U.S. Rep. Jerrold Nadler, a New York City Democrat, are pushing for at least $20 billion in new funding to be devoted to national mass transit systems.

That would allow the MTA to revive bus and subway projects that have been delayed or canceled as the authority has cut back on its $28 billion capital program.

The MTA board earlier this month approved a “doomsday” budget that would impose sharply higher fares and severe service cuts on New Yorkers unless the state or federal government intervenes. For details, see [ID:nN17336709]. (Reporting by Ciara Linnane; Editing by Jonathan Oatis)

By Jody Shenn

Dec. 18 (Bloomberg) — Americans seeking mortgages aren’t getting the full benefit of record low yields on Treasuries and government-supported mortgage bonds, blunting U.S. efforts to curb the housing crisis.

While the average rate on a fixed 30-year mortgage fell to 5.18 percent last week from 6.47 percent in October, according to Mortgage Bankers Association data, the historical relationship between home loans and mortgage bonds shows rates should be at least half a percentage point lower. Though the U.S. is paying nothing to borrow in some cases, homebuyers are paying about $730 more a year than they would otherwise on a $200,000 mortgage.

The demise of lenders including Countrywide Financial Corp. of Calabasas, California, and Seattle-based Washington Mutual Inc. reduced competition asrefinancings soar. At the same time, surviving mortgage banks face a credit crunch that limits their lending ability, industry officials say.

“Lenders have raised their prices over the last few weeks because of capacity concerns amid all this additional business,” said Brian Simon, chief operating officer at Freedom Mortgage Corp. The Mount Laurel, New Jersey-based firm is among the five biggest independent mortgage companies.

Even though mortgage rates have fallen, the decline hasn’t kept pace with the slide in yields on bonds backed by the loans. Yields on Fannie Mae’s 30-year current-coupon mortgage securities fell to about 3.85 percent today as of 11:45 a.m. in New York, from 6.04 percent on Oct. 31. Mortgage bond yields help determine what lenders must charge to make a profit when selling the debt, which in turn provides cash for new lending.

Widening Spreads

The difference between the average rate on a typical fixed- rate loan and Fannie-guaranteed securities widened to more than one percentage point last month for the first time in at least a decade, rising to more than 1.4 percentage points yesterday, data compiled by Bankrate.com and Bloomberg show. The average over the past five years is 0.14 percentage point.

Almost $6.7 trillion of U.S. home-mortgage bonds were outstanding on Sept. 30, and about 70 percent of those were guaranteed by government-chartered Fannie and Freddie Mac or federal agency Ginnie Mae, according to Federal Reserve data.

The Treasury market is about $5.7 trillion. Investors charged the U.S. zero percent interest when the government sold $30 billion of four-week bills on Dec. 9. The yield on the benchmark 10-year Treasury note has fallen to 2.07 percent from 4.08 percent in October.

Housing Slump

About $1.1 trillion of so-called agency mortgage securities have been created this year, about the same as in 2007 and up 25 percent from 2006, as banks and bond buyers shun other types of home-loan debt. The U.S. seized Washington-based Fannie and Freddie of McLean, Virginia, in September and began buying home- loan securities to lower financing rates and stem the worst housing slump since the Great Depression.

Additional moves, such as a plan being considered by the Treasury Department and backed by the National Association of Realtors to create loans with rates of 4.5 percent, may be coming because borrowing costs haven’t fallen further, said David Lykken, a consultant at Mortgage Banking Solutions in Austin, Texas, which sells advice to lenders.

The Fed said two days ago that it may expand a program that it announced last month to buy $500 billion of mortgage bonds.

The spread between rates and yields partly reflects greater uncertainty about how many applications will turn into loans as rates fluctuate and approvals drop, Lykken said. Home lenders hedge against changes in bond yields with instruments such as forward-sales contracts, which can cause losses if loan- completion rates don’t match their forecasts.

Refinancing Surge

After the Fed’s Nov. 25 announcement boosted mortgage-bond prices and Treasury yields tumbled, the average rate on a 30-year fixed-rate loan fell to the lowest since June 2003, according to Mortgage Bankers Association surveys, which cover borrowers with good credit and 20 percent down-payments.

The drop spurred a flood of loan applications from homeowners to refinance their loans, causing the mortgage trade group’s index measuring such activity to rise to 4,156 in the week ended Dec. 12 from 1,254 for the period ended Nov. 21.

The increase taxed lenders who fired employees earlier this year, making them reluctant to bring in business with more competitive rates on concern they couldn’t keep up.

“Our mortgage volume has quadrupled from a month ago,” said Bob Walters, chief economist at Quicken Loans Inc. in Livonia, Michigan. “I have no doubt other people’s numbers have done the same thing.”

Failed Companies

A larger gap between rates and yields usually implies bigger profits for lenders, though a need to hire temporary workers and pay overtime rates can boost expenses during origination booms.

“The issues include space, people and computers,” said Steve Jacobson, chief executive officer of Fairway Independent Mortgage Corp., a Madison, Wisconsin-based lender. “A few weeks ago we were concerned about things being slow in December and January, and now it’s like, how are we going to get through December and January?”

Lenders also charge varying fees, and make varying profits on the difference between interest payments on the mortgages and their own borrowing costs until the loans get sold. The value of contracts to service outstanding loans also affects the equation.

More than 100 mortgage companies have failed since the start of last year because of a record jump in U.S. foreclosures and a collapse in demand for loans outside Fannie, Freddie or federal- insurance guidelines. Since June, Countrywide, Washington Mutual and Charlotte, North Carolina-basedWachovia Corp., three of the top eight lenders, were acquired by rivals.

‘Disappointed’

The credit crunch for remaining non-bank lenders such as Taylor, Bean & Whitaker Mortgage Corp., the largest independent mortgage company, is also limiting options for home buyers. The firms rely on increasingly scarce credit lines to make new loans, and then hold the mortgages until they’re sold.

Taylor Bean Chairman Lee Farkas said in October that he was “disappointed” banks weren’t using U.S. capital injections to expand credit lines, after his capacity contracted to $3 billion from $7 billion in July 2007. That left the company able to hold 57 percent fewer loans.

“Even the big money center banks” that provide credit lines and make mortgages are restraining loans meant for quick sales as they cut risk-taking and seek to maintain ratios between capital and assets, Freedom’s Simon said. “Lenders are coming in and out of the market much more rapidly on price than they have in the past.”

Kennedy Administration

In June 2003, mortgage rates fell to 4.99 percent, the lowest since at least the John F. Kennedy Administration according to data from the Mortgage Bankers Association, whose refinancing index then was more than double today’s level, and past government lender surveys. Freddie’s weekly survey released today showed rates falling to 5.19 percent, the lowest in its 37- year history and down from 6.46 percent on Oct. 30.

More painful for borrowers than the fact that rates aren’t even lower now is that many who would benefit by refinancing at current rates can’t because of a lack of home equity after price drops, said Grant Stern, the owner of Morningside Mortgage Corp., a loan brokerage in Miami Beach, Florida.

“Let me tell you, the good rates are here right now,” he said.

Dec. 18 (Bloomberg) — Credit-card companies, facing an increase in defaults and a decline in consumer spending, are raising some rates, adding fees and cutting credit lines as the Federal Reserve is poised to make the most sweeping changes to the industry in 30 years.

The provisions, to be approved by the Fed today and take effect on July 1, 2010, may curtail lenders’ ability to raise interest rates on current balances, require they apply payments to charges with higher interest rates first and extend the time customers have to pay bills before incurring late fees. The Office of Thrift Supervision, which regulates savings and loans, approved the rules today.

The new rules come on the heels of a $700 billion federal bailout of the financial system, including $125 billion invested in the nine largest U.S. banks. Recent moves by JPMorgan Chase & Co., Citigroup Inc. and other firms to add charges and decrease the amount of money cardholders can borrow at the same time they’re taking taxpayer dollars have angered some customers.

“People are totally confused,” said Mark Zandi, chief economist at Moody’s Corp.’s Economy.com. “The taxpayer is essentially a big owner in JPMorgan, Bank of America and Citigroup, and these are the folks who make credit-card loans. Many are asking, ‘So why is it that my credit-card loan got pulled? Why am I being charged a higher rate?’”

A decline in spending by consumers and a rising number of defaults are leading Citigroup, JPMorgan and other lenders to increase fees and interest rates for some customers and cut the amount others can borrow. The changes are intended to reduce risk and raise revenue.

New Charges

Among the new charges are those for transferring balances from one credit card to another. Many lenders cap the amount they charge for this service. Now some are doing away with that limit and charging a percentage of the total, said Bill Hardekopf, chief executive officer of Lowcards.com, a Web site for consumers. Some banks are increasing fees for making purchases abroad.

Financial institutions also are expected to slash $2 trillion in credit-card lines in the next 18 months, Oppenheimer & Co. analyst Meredith Whitney wrote in a Nov. 30 report.

The changes are angering customers like Craig Marx, who has had a Chase card for 10 years and recently saw his minimum monthly payments climb to 5 percent from 2 percent and a monthly $10 service charge added to his bill. The bank also raised his rate from 3.99 percent above prime to 7.99 percent for the next two years, after which time it would become variable.

Angry Customer

“I’m incensed,” the 52-year-old Palo Alto, California, resident said. “I feel like they’re making a calculated decision to make me go away as a customer.”

Stephanie Jacobson, a spokeswoman for JPMorgan’s card unit, declined to comment on a specific customer. In general, the situation Marx described involved a choice of either accepting the rate change or the service fee, she said.

JPMorgan, which received a $25 billion capital infusion from the Treasury Department in October, says its credit-card lending increased by 3 percent in the third quarter from the previous quarter. CEO Jamie Dimon, 52, said in a Dec. 11 interview on CNBC that the company was using government money to “do exactly what they want us to do, make more loans, help the economy grow.”

Citigroup spokesman Samuel Wang said in an e-mailed statement that the bank is adjusting rates for customers who haven’t been repriced in at least two years and that cardholders can choose not to accept the changes. If they do so, the bank can take the card away when it expires.

Fed Rules

The Fed rules, proposed in May, were offered in response to criticism from Congress that the central bank was neglecting its authority to prevent abusive lending and strengthen consumer protections. It mirrors congressional efforts to curb practices that lawmakers say are harming consumers. Plans have been introduced by Senate Banking Committee Chairman Christopher Dodd and Representative Carolyn Maloney, a New York Democrat.

Rules curtailing some of the lending practices could hurt bank performance. Although many banks have other sources of revenue, a decrease in credit-card income “would seriously weaken a bank’s ability to absorb other shocks,” Gregory Larkin, senior banking analyst at Innovest Strategic Value Advisorsin New York, wrote in an October 2008 research report.

“Fees are a very, very important part of how issuers make money,” Hardekopf of Lowcards.com said. “Issuers make over a third of their money on the fees that are charged.”

Innovest said that credit-card charge-offs could hit $18.6 billion in the first quarter of next year, and $96 billion by the end of the year, forcing banks to search for other ways to generate revenue from customers.

Unpaid Balances

Delinquencies tend to follow unemployment, which were 554,000 first-time claims in the week ended Dec. 13, near a 26- year high reached the week before. Net worth for U.S. households and nonprofit groups fell $2.81 trillion from July to September, the most since tracking began in 1952. That means consumers are more strapped for cash, contributing to a slowdown in spending, which accounts for two-thirds of the economy.

“Banks are getting hit on several fronts right now from the losses in their investments, losses around mortgages and even generally from a consumer-confidence perspective,” said Eva Weber, an analyst at Aite Group LLC in San Antonio who follows bank regulatory and compliance issues. “Banks will need to reconfigure their business strategies and their risk-management strategies to account for the losses that they’re going to incur from the rules on interest rates and fees.”

American Express

Cardholders had $962 billion in unpaid balances on general purpose and proprietary cards at the end of 2007, an 8.6 percent increase from the previous year, according to the Nilson Report, an industry newsletter. That figure is expected to climb to $1.2 trillion by the end of 2012, or $6,373 per cardholder.

“Credit card rules, which we all understand address consumer concerns, the Fed recognizes that it will decrease the amount of credit available,” Edward Yingling, chief executive officer of the American Bankers Association, said in an interview yesterday.

Three analysts in the past week have recommended selling shares ofAmerican Express Co., while only four of 24 analysts have “buy” ratings, according to Bloomberg data. Friedman Billings Ramsey & Co. analyst Scott Valentin lowered his share- price target on Dec. 16 and reiterated his “underperform” rating, in part, he wrote, because of a “regulatory burden from increased oversight.”

American Express spokeswoman Joanna Lambert said that while the new rules will have an impact on the company’s business, only 20 percent of itssales come from interest on loans. Most of its revenue is generated by fees from transactions between consumers and merchants and from commissions, which aren’t being addressed by the Fed.

“We are in a better position than many of our competitors because we are less reliant on the credit end of our business,” Lambert said in an interview.

Some say the Fed rules will be good for credit-card companies as well as consumers.

“It will force them to be smart about who they make credit available to,” saidChris Armbruster, an analyst at Al Frank Asset Management in Laguna Beach, California, which oversees about $550 million, including shares of JPMorgan, Citigroup, America Express, Capital One Financial Corp. and Advanta Corp. “It should, over time, create fewer nonperforming assets, fewer charge-offs.”

By JONATHAN WEISMAN

President-elect Barack Obama’s economic team is crafting a stimulus package to send to Congress worth between $675 billion and $775 billion over two years, according to transition officials, and it expects a final price tag even larger.

The transition team has conveyed the figures to Capitol Hill, where the package is likely to grow as it works its way through the House and Senate. An Obama adviser familiar with the planning said the package could top out around $850 billion. Democratic leadership aides said it could easily exceed that before the package gets back to Mr. Obama’s desk in final form.

“The biggest fear is that people will do too little,” said one Democratic leadership aide, “like a start-up that fails because it didn’t do enough.”

Obama aides hope to keep the package below the trillion-dollar mark, a psychological threshold that could carry political consequences, as they fear being accused of adding too much to the country’s long-term budget deficit.

Obama advisers and Democratic aides in Congress are accelerating their work on the massive economic recovery package this week, ahead of Mr. Obama’s two-week holiday in Hawaii and the break between the disbanding of the 110th Congress and the forming of the 111th. Both sides in the talks want a package ready when Congress returns Jan. 6, so legislation can reach the House and Senate floors before Mr. Obama’s Jan. 20 inauguration.

Even before the details are known, a coalition of liberal groups and labor unions on Thursday announced a major campaign to get the package passed before Inauguration Day, arguing that the new president should not have to expend political capital to rescue the economy left behind by his predecessor.

The coalition includes unions such as the Service Employees International Union and the AFL-CIO, the Sierra Club and umbrella group Americans United for Change, which helped sink President George W. Bush’s effort to add individual investment accounts to Social Security.

The broad parameters of the package are known already. It will include a tax cut designed to pump $50 billion to $100 billion into the economy almost immediately; around $100 billion in aid to state governments, primarily to temporarily assume more of the cost of Medicaid, in hopes of staving off benefit cuts or tax increases; and funding in five main areas: traditional infrastructure, school construction, energy efficiency, broadband access and health-information technology.

But, in pursuing the largest fiscal stimulus since the Depression, Democrats are likely to add many more categories, legislative aides say.

NEW YORK (CNNMoney.com) — State regulators closed another regional bank in Georgia Friday, bringing the total number of failed banks this year to 24.

The Federal Deposit Insurance Corp. said the four branches of Duluth, Ga.-based Haven Trust Bank will reopen as Branch Banking & Trust on Monday. It was the fifth bank in Georgia to fail this year.

Haven Trust had total assets of $572 million and total deposits of $515 million. Branch Banking & Trust, which is based in Winston-Salem, N.C., agreed to assume all of the deposits for $112,000.

The FDIC estimates that the cost to the Deposit Insurance Fund will be $200 million.

“Haven Trust Bank clients will benefit from the stability of a bank that is driven by values, [which] guide every decision we make and ensure everything we do is in the best interest of our clients,” said BB&T in a statement on its Web site.

Bank failures have increased dramatically this year as a global financial crisis has unfolded. The 24 banks closed this year compares with only three bank failures last year, and none in 2006 and 2005.

In fact, the number has not been this high since 1993, when 42 banks failed, according to the FDIC.

While the majority of the failures have been at small, regional banks that were exposed to the downturn in the housing market, the financial crisis has also brought down a number of very large banks.

In September, Seattle-based thrift Washington Mutual became the largest bank failure in U.S. history. That followed the demise of IndyMac Bank, a Pasadena, Calf.-based bank that had $32 billion in assets when it was closed in July.

The spike in failures comes amid rising loan delinquencies and defaults as consumers and businesses struggle with the weak economy.

At the same time, credit has been extremely tight as banks hunker down in anticipation of more writedowns related to illiquid mortgage-backed securities.

Meanwhile, the federal government has pumped billions of dollars into the financial system in an effort to free up lending and revive the ailing economy. But banks remain reluctant to lend as the economic outlook grows darker. 

WFSC 7.49, +0.49, +7.0%) announced today that its subsidiary, Bank of Asheville, is participating in the FDIC’s Temporary Account Guarantee Program (“TAGP”), which is a part of the FDIC’s Temporary Liquidity Guarantee Program (“TLGP”). The purpose of the TLGP is to strengthen confidence and encourage liquidity in the banking system.

 http://www.bankofasheville.com/

Posted by: Monica Gagnier on December 12

No one could have been more shocked than me to read that federal investigators yesterday arrested trader and hedge fund manager Bernard L. Madoff for allegedly defrauding investors of $50 billion in a Ponzi scheme.

I got to know Madoff, and his brother Peter, who has not been indicted, during the 1980s, when I covered NASDAQ for the startup financial paper Investor’s Business Daily and later for the newsletter Trading Systems Technology.

The Madoff brothers helped push for greater transparency and accountability to the over-the-counter market, which was then in a major battle for listings with the New York Stock Exchange and the American Stock Exchange. That was their public stance; I can’t vouch for what their position was behind closed doors.

Bernard Madoff, a former chairman of the NASDAQ Stock Market and founder of Bernard L. Madoff Investment Securities, was one of the few NASDAQ market-makers who competed with the New York Stock Exchange, by trading stocks listed on the Big Board. His broker/dealer firm did this through an electronic market that was operated at the Cincinnati Stock Exchange.

Through the Cincinnati exchange, the Madoffs were pioneers in electronic trading and publicly spoke of the need to use technology to transform the inefficient and sometimes shady over-the-counter stock market.

The Madoff brothers are Brooklyn boys who made the big time. I liked their street smarts and their charm. Bernie was the elder statesman and Peter was the young visionary. They were generous with their time, whether it was explaining the intricacies of market structure to a fledgling reporter or striving to improve the competitiveness of the NASDAQ Stock Market.

It was thanks to the efforts of people like Bernie Madoff that NASDAQ was able to attract listings from top-tier tech companies such as Apple, Sun Microsystems, Cisco Systems, and later search powerhouse Google.

The Madoffs weren’t altruists; they were realists. They understood that high standards in the OTC market would help attract the best publicly traded companies to NASDAQ. That in turn would increase trading volume, giving their broker/dealer firm more chances to earn the spread between the bid and ask price for a stock, even as greater transparency narrowed that spread.

My first thought upon reading how Madoff’s secretive hedge fund had crumbled in the wake of the stock market collapse was that I was glad that former NASDAQ CEO Gordon Macklin, who died in 2007, wasn’t here to witness his friend’s downfall. After all, the Madoffs have been in the OTC business for nearly half a century and on Wall Street are synonymous with NASDAQ.

I also couldn’t help wondering whether the lack of regulation and oversight of the hedge fund market lends itself to abuse. If you don’t have to report quarterly results to the Securities & Exchange Commission, you can keep the financials locked up in a safe, as this Wall Street Journal story alleges that 70-year-old Madoff did.

It’s ironic that a man who campaigned for greater transparency within NASDAQ should end up being charged with fraud.