Fed's Historic Rate Cut Boosts Wall StreetWall Street responded to the Federal Reserve's historic interest rate cut with the Dow Jones Industrial Average jumping 360 points along with broad indexes pushing up more than 5 percent. The U.S. central bank Chairman Ben Bernanke pledged that the Fed would use all of its available tools to rescue the nation's floundering economy. The Fed set its target rate at which banks lend to each other to a range of zero to 0.25 percent, the lowest on record.
The Fed's rate decision on Tuesday was accompanied by news that the economy continues to slide: Commerce Department's report of a 18.9 percent drop in new housing starts in November and Labor Department's report showing that consumer prices dropped 1.7 percent.
SEC's Cox: Internal Investigation on Madoff Fraud Launched
The Securities and Exchange Commission, the federal agency charged with protecting Wall Street investors, has launched its own internal investigation as to how Bernard Madoff was able to pull off what is being called the biggest Ponzi scheme in history for at least 10 years. SEC's Chairman Christopher Cox says in a written statement that the SEC's initial findings "have been deeply troubling." The Commission learned that "credible and specific allegations" about Madoff's financial wrongdoings going back as far as 1999 were repeatedly brought to the attention of SEC staff, but weren't recommended to the Commission for action. Cox says he is "gravely concerned" by these apparent multiple failures to pursue the allegations. He has directed a full and immediate review of the allegations and will look into SEC staff contact with the Madoff firm and its employees.
Goldman Sachs, Morgan Stanley Report Losses
Both of the investment banks that recently filed to become bank holding companies, Goldman Sachs and Morgan Stanley, have reported fourth-quarter losses of more than $2 billion.
Goldman, long considered the premier investment bank on Wall Street, posted its first quarterly loss since going public in 1999, saying it lost $2.29 billion during the fourth quarter. A year ago Goldman posted earnings of $3.17 billion in the fourth quarter.
Morgan Stanley reports a $2.2 billion loss for the fourth quarter, wider than estimated, as its investment bank fees declined along with the value of fixed-income securities. Morgan's CEO John Mack has said he will not accept a bonus for the second straight year. Morgan and Goldman are the only two investment firms left standing after Bear Stearns was bought by JPMorgan Chase, Lehman Brothers filed for bankruptcy and Merrill Lynch was sold to Bank of America.
Goldman says it is considering internet banking and would look at a possible acquisition in order to achieve this increase. It has set as its goal an increase between $50 billion and $100 billion from its present deposits of around $20 billion. Both banks are now able to draw federal funding from the $700 billion bailout fund. Morgan has already received $10 billion, Goldman also received $10 billion in TARP funds.
Computer Glitch At Citibank
A computer glitch discovered late on Tuesday night has left Citibank account holders with limited access to their money on Wednesday. Citibank, according to a news report from a New York television station, is working to repair an unspecified computer glitch. Citibank may have lost access to its account records from a database or backup corruption incident. The news report wasn't sure of the cause, but the problems did not appear to be due to a security breach. The bank is working to repair the damage and says it will take most of the day.