The end of Wall Street

The US is in a "once-in-a century" financial crisis, according to the former Federal Reserve chief Alan Greenspan. The bankruptcy of Lehman and acquisition of Merrill Lynch coming after the rescue of Bear Stearns, represents the failure of the Wall Street banking model. The economical turmoil that American now faces may completely reshape the presidential race. Conflicting reports on whether Pakistani forces repelled an incursion by US helicopters into South Waziristan.

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"The United States is mired in a 'once-in-a century' financial crisis which is now more than likely to spark a recession, former Federal Reserve chief Alan Greenspan said Sunday," AFP reported. "The talismanic ex-central banker said that the crisis was the worst he had seen in his career, still had a long way to go and would continue to effect home prices in the United States. " 'First of all, let's recognize that this is a once-in-a-half-century, probably once-in-a-century type of event,' Greenspan said on ABC's This Week. "Asked whether the crisis, which has seen the US government step in to bail out mortgage giants Freddie Mac and Fannie Mae, was the worst of his career, Greenspan replied 'Oh, by far'." Fortune magazine, under the headline "The end of Wall Street" said: "Now that Lehman has declared bankruptcy, and Bank of America is buying Merrill Lynch for $50 billion, the ranks of Wall Street survivors have shrunk in the space of six months from five to two, Goldman Sachs and Morgan Stanley. "With Merrill, and Bear Stearns before it, being acquired by giant commercial banks, we're witnessing the triumph of the diversified, universal banking model over the Wall Street one that focused on trading securities and advising corporate clients. "Eventually, the trend will probably capture Morgan Stanley and Goldman as well. Even if they skirt the fate of their former peers, their time is past. "The demise of old Wall Street isn't just about bad bets on mortgages or the hubris of [Lehman's CEO] Dick Fuld. It's the failure of an antiquated, risky strategy that depended on macroeconomic luck and that grossly overcompensated employees for being in the right place at the right time." In The New York Times, columnist and professor of Economics at Princeton, Paul Krugman, wrote: "To understand the problem, you need to know that the old world of banking, in which institutions housed in big marble buildings accepted deposits and lent the money out to long-term clients, has largely vanished, replaced by what is widely called the 'shadow banking system.' Depository banks, the guys in the marble buildings, now play only a minor role in channeling funds from savers to borrowers; most of the business of finance is carried out through complex deals arranged by 'nondepository' institutions, institutions like the late lamented Bear Stearns - and Lehman. "The new system was supposed to do a better job of spreading and reducing risk. But in the aftermath of the housing bust and the resulting mortgage crisis, it seems apparent that risk wasn't so much reduced as hidden: all too many investors had no idea how exposed they were. "And as the unknown unknowns have turned into known unknowns, the system has been experiencing postmodern bank runs. These don't look like the old-fashioned version: with few exceptions, we're not talking about mobs of distraught depositors pounding on closed bank doors. Instead, we're talking about frantic phone calls and mouse clicks, as financial players pull credit lines and try to unwind counterparty risk. But the economic effects - a freezing up of credit, a downward spiral in asset values - are the same as those of the great bank runs of the 1930s." In The Washington Post, Chris Cillizza wrote: "After weeks of petty bickering between the two parties, the financial crisis has the ability to fundamentally reshape the playing field of the presidential race as both Democrat Barack Obama and Republican John McCain seek to deal with the new realities presented by the events of the last 96 hours. The truth is that neither candidate has done a sterling job until now of providing leadership on the issue or laying out a compelling, coherent economic plan. So both have a lot to gain or lose in the way they respond to the latest crisis, with less than two months before the election. " 'It's 3 am on Wall Street,' wrote Howard Wolfson, former communications director for Hillary Rodham Clinton's presidential campaign, on his Gotham Acme blog. 'Will either candidate offer an explanation of the problem and a plan to fix it that will reassure voters and break through the din?' "During a campaign event in Jacksonville, Florida, this morning, McCain reiterated his belief that the underpinnings of the country's economy are solid but that the current situation is untenable. " 'Our economy, I think, is still - the fundamentals of our economy are strong, but these are very , very difficult times,' McCain said, according to a report by the Post's own Bob Barnes. 'I promise you we will never put America in this position again. We will clean up Wall Street.' " Fox News reported: "John McCain sounded the alarm this afternoon about the state of the American economy as he took incoming [fire] from Democrats accusing the Republican nominee of being out of touch on pocketbook issues. " 'The American economy is in crisis. It is in a crisis. People tonight will be sitting around the kitchen table trying to figure out how they're going to stay in their homes, how they're going to keep their job, how they're going to put food on the table. And America is in a crisis today and unemployment is on the rise and our financial markets are in turmoil,' McCain said, conveying to the nearly 300 attendees at his Orlando town hall that his alarm at the state of affairs." In The Washington Post, Dan Balz wrote: "[The] financial market meltdowns have both symbolic and real effects on average Americans, even if they cannot understand exactly what has happened or why. President Bush, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke are on the front lines of this crisis now, but in a matter of months either McCain or Obama will be in charge. They have 50 days to demonstrate they're capable of dealing with it. "McCain certainly faces the bigger challenge. The economy and domestic issues are not his natural terrain. Beyond that, he must answer for what happened on Bush's watch and offer a plausible explanation for why his presidency would be genuinely different. Obama already is attacking him as ill-equipped to deal with the crisis and has aggressively moved to tie a future McCain administration to a lobbyist-dominated Washington culture. "Obama's challenge is different. He begins with the Democrats' natural advantage on the economy, but where he remains suspect is on the strength of his leadership and his struggle to connect with working class voters."

Conflicting reports on Pakistani forces repelling a US incursion

"Confusion swirled over a possible incursion by United States forces into Pakistani territory in South Waziristan on Monday," The New York Times reported. "Local residents and a Pakistani government official said two American helicopters were repulsed when Pakistani soldiers fired at them, but the Pakistani and United States military publicly denied any such incident, and a Pakistani intelligence official said that an American helicopter had mistakenly crossed the border briefly, leading Pakistani ground forces to fired into the air. "The Pakistani official, a senior official who deals with the tribal areas and who spoke on condition of anonymity, said that American troops had tried to land in South Waziristan at a town called Angoor Adda, in a mountainous region with thick forest on the border with Afghanistan." Pakistan's The News said: "[a] security official said on Monday that US armoured vehicles were also seen moving on the Afghan side of the border, while US warplanes were seen overhead. "He said Pakistani soldiers sounded a bugle call and fired in the air, forcing the helicopters to return to Afghan territory. Military spokesman Major Murad Khan confirmed that there had been shooting. But he said the American helicopters had not crossed into Pakistani airspace and Pakistani troops were not responsible for the firing. " 'The US choppers were there at the border, but they did not violate our airspace,' Khan said. 'We confirm that there was a firing incident at the time when the helicopters were there, but our forces were not involved.'