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FDIC Draws Brisk Bidding on Failed-Bank Loans - WSJ.com on 2009-12-23
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FBI Probes Hack at Citibank - WSJ.com on 2009-12-22
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Attacks on corporations are "at an epidemic level," former White House cyber-security director Melissa Hathaway said recently.
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U.S. banks have generally been loath to disclose computer attacks for fear of scaring off customers. In part this is an outgrowth of an experience Citibank had in 1994, when it revealed that a Russian hacker had stolen more than $10 million from customer accounts
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Among weapons the hackers used, according to people familiar with the case, was a small army of infected computers commanded by software called Black Energy. Hackers use Black Energy primarily to block access to Web sites. Somebody used it during Russia's brief 2008 war with Georgia to shut down Georgian government and bank Web sites. Someone also used it in 2007 to block government and bank Web sites in Estonia and to attack the Web site of a political foe of Vladimir Putin, then Russia's president and now its prime minister.
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Black Energy was written by a Russian hacker who goes by the name Cr4sh, said Joe Stewart, a researcher for SecureWorks, a computer-security company. The software sells online for $40, according to Jose Nazario, a manager at Arbor Networks, which analyzes computer threats.
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Black Energy can be upgraded to invade computer systems and snatch data. DigitalStakeout, a firm that monitors cyber attacks, found in April that Black Energy was being used with a tool that steals bank-account log-on information. The combination was being sold online for $700 as a package called the YES Exploit System, said DigitalStakeout's chief executive, Adam Mikrut.
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Investigators discovered that a computer at Mr. Blanchard's lighting company had been infected by a computer at another company he co-owns. That one then dragooned his lighting-company computer into a group of computers used to attack others -- the same modus operandi as Black Energy's.
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The software loaded on one of Mr. Blanchard's computers included a spyware program that logged the keystrokes he typed and could capture the data he used to sign on to his bank account, he says. He adds that after days of prodding, Citibank sleuths began working to help him recover $810,855 from the Latvian bank, and Citibank then gave him the remainder.
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U.S. States Look Abroad for Debt Buyers - WSJ.com on 2009-12-22
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It may not be long before U.S. state governments begin to aggressively market their bonds overseas.
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If that helps them to get something done at an acceptable level, why not, especially if people have run out of capacity for the name
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States are really U.S. subsovereigns and make a good fit for international portfolios.
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"I'm sure all the states are willing to tap into foreign demand," said Peter Coffin, president of Breckenridge Capital Advisors in Boston. "Foreign banks treat this as sovereign credit risk. It's treated favorably."
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In June 2003, Illinois sold $10 billion of taxable pension fund bonds domestically in a blowout sale that saw foreigners oversubscribe the issue heavily.
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In a broader sense, the $2.8 trillion municipal bond market is changing in many ways, and this is one of them.
So far this year, taxable state and local debt—with a boost from Uncle Sam—has risen to around $83 billion from $23 billion a year ago. The Obama administration's fiscal stimulus package allowed state and local governments to issue Build America Bonds, providing a 35% interest-cost rebate to most issuers and up to 45% in some cases. That lowered their financing burdens while offering higher returns to investors.
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BABs, which weren't around last year, account for $63.5 billion of the $83 billion taxable total and for about 16% of the $398 billion long-term bonds sold by state and local governments so far this year,
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Mexico Ramps Up Drug War With a Surge on Rio Grande - WSJ.com on 2009-12-22
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"The assassins have won," says Bernardo Garcia, the white haired owner of a tiny tortilla factory. His brother Refugio, a clothes vendor, was killed two weeks ago as he left a church service with his daughter by a drug gang who wanted to extort him. "Only God can help us now," he says.
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The conservative has won praise in many quarters, including Washington, for squarely taking on the drug gangs.
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Mr. Calderón has extradited dozens of traffickers wanted in the U.S
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"He stays for two hours and he's gone," says Daniel Murgía, president of the local Chamber of Commerce. "They've left Ciudad Juárez totally alone. There is a total absence of authority."
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Mr. Murgía and other business leaders last month called for the United Nations to send peacekeepers to tame the city's violence. Mr. Murgía went further and breached a Mexican taboo when he asked that the U.S. send military police to help. In early December, 3,000 Juárez citizens staged a protest march. Some carried placards asking the army and federal police to leave.
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Ciudad Juárez has the look and feel of an occupied city. Soldiers, their faces covered with black balaclavas and manning automatic rifles or 50 caliber machine guns, constantly crisscross Ciudad Juárez in open-backed SUVs.
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In some ways, Capt. Velásquez and the Mexican army in Ciudad Juárez are in a similar situation to U.S. soldiers when they first occupied Baghdad after ousting Saddam Hussein. The U.S. had overwhelming superiority in troop strength and firepower, but its conventional forces were soon bogged down in a guerrilla war with an enemy that ambushed U.S. troops with devastating results. Lacking good intelligence, the U.S. could neither protect the general Iraqi population nor effectively strike back at its guerrilla tormentors.
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While Ciudad Juárez' drug dealers and hit men aren't guerrillas or suicide bombers—largely they are trying to kill each other instead of Mexican soldiers—they do use the hit-and-run tactics of guerrillas, melting back into the population and making it difficult to tell who is who. As in Iraq, ordinary citizens are afraid to provide information to the authorities. On their daily rounds, Capt. Velásquez and his men are also under constant surveillance from young boys working for the drug gangs who inform their bosses of his patrol's every movement.
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Ciudad Juárez's troubles began in January 2008, when Mexico's most notorious drug lord, Joaquín "El Chapo" Guzman, tried to take over the city's drug trade from the local Juárez Cartel, which was itself backed by a cadre of corrupt cops and ex-cops called La Linea,
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The confrontation has reshaped life in Ciudad Juárez. At times, hit men from both sides have broken into hospitals to finish off wounded victims, so now, people wounded by assassins are only taken in at three city hospitals which have extra security. Funeral corteges are also targets, so funeral masses are shorter and also have special security.
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Drivers in the morning rush hour have sometimes been greeted with the grisly sight of dismembered bodies. One favorite dumping ground is a highway overpass known as the Rotary Bridge in honor of the city's Rotary club. Authorities say women are taking up the assassin's trade, and they can be as cold-blooded as the men. It was a woman who walked up to another woman dropping off a friend at the city's largest hospital and shot her dead two weeks ago in the middle of the day.
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The drug gangs have branched out into extortion.
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Extortionists had driven out 14 out of the mall's 18 clients.
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"Anybody who has any money is leaving for the other side of the border," he said. "You can't live here anymore."
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The extortion wave has spread to funeral homes. Last month, an assassin and his driver parked in front of the Funeraria del Refugio, a squat, yellow building on a crowded street. The killer walked in, interrupting a funeral, and locked mourners in the bathroom, yelling that he had come to collect a protection payment. He then executed the funeral home's manager, police and eyewitnesses say. The next day, the men returned and burned down the funeral home.
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Some experts say the Mexican army needs to adopt the style of the counter-insurgency tactics used by the U.S. military in the Iraq war. That strategy got American soldiers out of large bases and forced them to interact with the population and get intelligence. "They have to co-mingle with the locals and find out who's who in the zoo. Find out where the bad guys are, and preempt them," says a former U.S. military officer with knowledge of the Mexican army. But, the official says, the Mexican army, which is made up of conscripts, isn't trained on how to interact with the community. The result: a lot of patrolling that's good for show but bad for results
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In Ciudad Juárez, soldiers generally are on patrol or back at a local army base or other temporary housing, including abandoned factory buildings. One reason: the high command fears that contact with the city's drug traffickers could induce desertions to the dark side.
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It has happened before. In 1997, about 30 defectors from an elite army unit went to work for the Gulf Cartel. These former soldiers, known as "Zetas," became the Gulf Cartel's enforcers, deploying tactics such as decapitations to terrorize rival cartels and law enforcement.
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Manuel Aponte, a former army lieutenant who deserted in 2004, has become the right hand man of Joaquin Guzman, the cartel leader, and is leading the Sinaloa cartel's assault on Ciudad Juárez, according to a recent Mexican intelligence document viewed by The Wall Street Journal.
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Soldiers aren't considered to be remotely as corrupt as Mexico's notorious police forces. But the army has a questionable record. A decade ago, Mexico was deeply embarrassed when its newly named drug czar, army Gen. Jesús Gutíerrez Rebollo, was arrested for being in the pay of a drug lord.
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Others in Ciudad Juárez doubt such claims. Mexican authorities, be they army or police, have little capacity to investigate crimes. Many people here believe that the authorities resort to torture or beatings to wring confessions out of suspects. "So what does the army do? They find a guy, and they hang 30 murders on him!" says Hernán Ortiz, a professor and civic activist. "Does anyone believe these cases were investigated?"
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Fund Boss Made $7 Billion in the Panic - WSJ.com on 2009-12-21
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"Investing with David is like flying, with hours of boredom followed by bouts of sheer terror," says Alan Shealy, a client of more than 18 years. "He's the quintessential opportunist, investing in any asset class, but you have to have a cast-iron stomach."
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r. Tepper explains his investment philosophy with a line from Allan Meltzer, a professor at his alma mater: "Trees grow." In other words, growth is the natural state of economies, so optimism usually is rewarded.
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The news from the Treasury Department struck Mr. Tepper as proof that the government would stand behind the banks. He directed his traders to begin buying bank stock and debt.
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"This is ridiculous, it's nuts, nuts, nuts!" Mr. Tepper recalls saying to Michael Lukacs, one of his partners, on the firm's small trading floor. "Why would the government break its word? They're not going to let these banks go under, people aren't being logical!"
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Mr. Tepper insisted that stimulus spending and low interest rates would boost the economy. He said he estimated there was only a 20% chance that the U.S. would nationalize banks such as Citigroup.
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Mr. Tepper got on the phone to make more trades, something he often left to subordinates. This time, he wanted to talk directly to Wall Street brokers to test how bad things really were.
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The answer: really bad. Mr. Tepper says he was told that he was the only big investor doing much buying.
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"Clients were nervous that the game had changed and capitalism wouldn't be the same. There was real fear," recalls Timothy Ghriskey, chief investment officer at Solaris Asset Management, a $2 billion investment firm, who says he only bought a small amount of bank shares during this period.
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Mr. Tepper hadn't paid his investors' nerves much heed since 2000. That year, he bet that the tech-heavy Nasdaq index would fall. But so many investors complained that Mr. Tepper was straying from his roots in debt investing that he canceled his bets. When the Nasdaq collapsed months later, Mr. Tepper fumed.
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Mr. Tepper says the worrywarts have it wrong: "If you think the economy will be fine, as we do, then we're going to do very well."
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Congress To Vote on Debt Ceiling - WSJ.com on 2009-12-16
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Milton Friedman used to say that the nation would be far better off with a budget half the current size but with larger deficits
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Mr. Obama and his allies in Congress have done the opposite: They have increased the budget by 50% and financed the spending with IOUs.
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Our concern is that the Administration and Congress view this debt as a way to force a permanently higher tax base for decades to come. The liberal grand strategy is to use their accidentally large majorities this year to pass new entitlements that start small but will explode in future years.
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U.S. creditors will then demand higher taxes—taking income taxes back to their pre-Reagan rates and adding a value-added tax too. This would expand federal spending as a share of GDP to as much as 30% from the pre-crisis 20%.
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The late Paul Samuelson, the revered dean of the neo-Keynesians, expressed the prevailing view in those days when he called the Reagan deficits "an all-consuming evil."
But wait: Those "evil" Reagan deficits averaged less than $200 billion a year, or about one-quarter as large in real terms as today's deficit. The national debt held by the public reached its peak in the Reagan years at 40.9%, and hit 49.2% in 1995. This year debt will hit 61% of GDP, heading to 68% soon even by the White House's optimistic estimates.
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The President's own budget office forecasts that annual interest payments by 2019 will be $774 billion, which will be more than the federal government will spend that year on national defense, education, transportation—in fact, all nondefense discretionary programs.
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"Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren," Senator Barack Obama said during the 2006 debt-ceiling debate. "America has a debt problem and a failure of leadership. Americans deserve better." That was $2 trillion ago, when someone else was President.
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How Facebook Is Making Friending Obsolete - WSJ.com on 2009-12-16
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Facebook presented its 350 million members with a new default privacy setting last week. For most people, the new suggested settings would open their Facebook updates and information to the entire world. Mr. Schnitt says the new privacy suggestions are an acknowledgement of "the way we think the world is going."
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Facebook also made public formerly private info such as profile pictures, gender, current city and the friends list. (Mr. Schnitt suggests that users are free to lie about their hometown or take down their profile picture to protect their privacy; in response to users' complaints, the friends list
can now be restricted to be viewed only by friends).
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So I give up. Rather than fighting to keep my Facebook profile private, I plan to open it up to the public – removing the fiction of intimacy and friendship.
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Dubai: A High Rise, Then a Steep Fall - WSJ.com on 2009-12-16
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DUBAI -- As financial crisis roiled much of the world in October 2008, the head of Dubai's biggest state-owned developer unveiled his latest megaproject: a $38 billion development that would include a tower nearly two-thirds of a mile tall.
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"The fundamentals in the market are too strong," he said. "There won't be a crash."
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Since then, residential real-estate prices in Dubai have slumped by almost 50%.
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Behind this jolt was one of the world's most concentrated property bubbles. Some $430 billion worth of construction projects have been scrapped across the United Arab Emirates,
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His vision for the city -- a tolerant, modern metropolis open to the world, its many faiths and some of its excesses -- has long rankled conservative Arab neighbors, including some officials in Abu Dhabi, the buttoned-down capital of the U.A.E.
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But for others, Dubai became a symbol of what a modern Arab state might achieve if it embraced the West and its financial system. President Barack Obama, in a June speech to the Muslim world in Cairo, singled out Dubai as a place where economic development worked.
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the Mall of the Emirates, which houses an indoor ski slope
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"we will come out of it stronger,
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touting Dubai's proximity to both Asia and Europe, its tax-free and tolerant way of life and its position as the region's business hub.
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Foreign executives, architects and real-estate brokers flocked here for the seemingly limitless scope to pursue big projects.
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"To Let" signboards adorn the facades of dozens of recently finished buildings along Sheikh Zayed Road
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Office vacancies in new buildings run at 41%,
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state-owned property developer, Nakhee
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The debt announcement appeared to open a fresh rift between Dubai and U.A.E. capital Abu Dhabi. Federal officials there were livid at being left in the dark by Dubai's decision to seek a debt standstill, say people familiar with the situation. The rift has the potential to unsettle an important U.S. ally in the Persian Gulf, because Dubai, as a re-export hub and offshore financial center for Iranian businesses, is seen as key to U.S. efforts to isolate Iran.
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while the U.A.E. federal government orchestrated a $10 billion bailout earlier this year for Dubai companies, it hasn't stepped in to offer assistance to Dubai World.
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Dubai's growth began in the early 1980s when Sheik Mohammed and his father pushed to diversify the economy in the face of dwindling oil.
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In 2002, Sheik Mohammed opened the door to foreign ownership of property in certain developments. With little more than a brochure and a floor plan, buyers began to slap down deposits on townhouses, apartments and villas that wouldn't be ready for years.
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"It takes a man of great vision to write on water," the poem reads in part
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In 2006, Sheik Mohammed consolidated a handful of government businesses into the Dubai World holding company, with Sultan Ahmed bin Sulayem as its leader
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To head Nakheel, Mr. Sulayem, in turn, plucked Mr. O'Donnell from Australia, where he headed a fast-growing property fund.
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In September 2006, at a separate, 914-acre residential community called Jumeirah Park, villas starting at $654,000 sold out in a day. International banks and local lenders offered loans for up to 97% of the purchase price.
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Investors rushed to buy a piece of Nakheel's Islamic bond, known as a sukuk. Swamped by demand, the borrower increased the issue's size to $3.5 billion.
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In 2007, a Dubai World affiliate bought the Queen Elizabeth 2, unveiling plans to moor the ocean liner at the Palm Jumeirah and turn it into a luxury hotel.
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By then, cracks in the real-estate market were forming. Officials had put few regulations on development that might limit the speculation. Now, concerned that the market had grown overheated, they did so. And in early 2008, authorities embarked on a series of high-profile corruption investigations at some big real-estate and finance firms.
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But police, courts and the companies themselves disclosed little about the probes. As a result of the lack of transparency, the crackdown on corruption, instead of comforting investors, spooked them
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Typical was the case of British developer Arthur Fitzwilliam,
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A British banker agreed to provide financing, in exchange for a 30% stake, Mr. Fitzwilliam said in an interview.
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Tables Turn on the Euro - WSJ.com on 2009-12-15
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Now it seems that traders are latching onto every available sliver of negative news on the euro and using it as a trigger to punish the currency, particularly against the resurgent dollar.
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Now it seems that traders are latching onto every available sliver of negative news on the euro
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"Things are relevant only when the market wants them to be relevant," said Neil Mellor, a currencies analyst at Bank of New York Mellon in London. In recent months, a steady grind lower in the dollar has blinded many traders to euro-zone risks, but that is now changing, Mr. Mellor said.
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"Six months ago, people would have thought 'it's only Greece,' or 'it's only Austria.' Now these things are taken as a reason to sell the euro," he said.
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this week, the outlook darkened further as fellow euro member Austria nationalized its sixth-largest bank. Reassurances from the Austrian central bank that it isn't running a watch list on other banks have done nothing to calm nerves, amid concerns that the euro zone's banks as a whole may still face serious problems. In the long run, that could hold them back from helping to finance a sustained economic recovery in the 16-nation currency bloc.
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Banks in the U.K. and the U.S. have had their write downs and their government support, but we feel there's still stress out there in the European banks that is not priced into the currency," he added. In addition, euro-zone data have been limp. Wednesday, economic expectations for Germany were shown to have deteriorated in December, indicating that the country's recovery may slow after a surprisingly vigorous rebound earlier in the year.
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Earlier this month, euro-zone gross domestic product in the third quarter was confirmed to have declined by 4.8% in annual terms.
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That all forms a clear contrast with U.S. economic data, with traders seizing on a run of relatively punchy figures for the labor market, consumer confidence and retail sales as reasons to push the dollar higher based on growing expectations for U.S. interest rate rises.
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Niall Ferguson - Wikipedia on 2009-12-15
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