After breathing life back into the financial system on Friday, US authorities began an all-out effort to prevent the world's largest economy from seizing up during the coming week as the Bush administration and Congress wrangle over a hurried overhaul of regulations accompanied by a historic bailout that could cost US taxpayers up to US$700 billion (Dh2.57 trillion).
Markets rallied on Friday as administration officials rolled out one unprecedented program after another aimed at alleviating the panic that set in earlier in the week with the collapse or hasty sale of three of the country's landmark financial institutions - the investment banks Lehman Brothers and Merrill Lynch and American International Group (AIG) insurance company. Lehman, Wall Street's fourth-largest investment bank, filed for bankruptcy protection. Merrill, under severe duress from the Lehman collapse, sold itself to a major commercial lender, Bank of America. And AIG needed an $85bn government loan to stave off bankruptcy.
The Federal Reserve and US Treasury on Friday managed to reverse the steep market slide that followed with a rapid-fire series of historic programs designed to insulate retail and corporate investors from the fallout. The Treasury department, fearing an exodus of investors from mutual funds, moved to guarantee a whole new class of mutual fund assets worth $3.4trn and said the mortgage giants Fannie Mae and Freddie Mac, which the government recently took over, would buy more mortgage-backed securities to help the housing market. The Securities and Exchange Commission temporarily banned "short selling", a way of betting a share will fall in price, for 799 stocks.
Topping all that, however, Hank Paulson, the treasury secretary who once ran the investment bank Goldman Sachs, announced that the administration would bring the largest bailout plan in history to Congress this week, saying it would cost taxpayers up to $700bn.
The centrepiece of the ambitious, and sure to be controversial, plan is a massive new program that would use taxpayers' money to buy securities whose value has been impaired from ailing financial institutions. That would relieve the institutions of one of the biggest burden's preventing them from extending new loans to keep the economy going, but also spare them the worst of the consequences from years' worth of ill-conceived bets and hyper-aggressive borrowing that fuelled a string of record profits earlier in the decade.
The plan is aimed at insulating the world's largest economy from a body blow. So far, the US economy has been resilient despite the stresses and strains of the credit crunch. The economy has continued to grow at a respectable pace, to the surprise of many economists. But unemployment recently hit a five-year high of 6.1 per cent, consumer spending has slackened and gains in the dollar have started to threaten exports, the brightest spot over the past year. The Bush administration is arguing that nothing short of a sweeping overhaul of the financial regulatory structure, accompanied by huge dollops of public funds, will be enough to break the tightening grip of financial institutions pulling back credit and stem the fall in home prices tugging the economy down.
"This is a pivotal moment for the American economy," President George W Bush said.
Since countries all over the world depend on US demand - from oil sales to Chinese manufactured products to holiday destinations - problems in the US economy would quickly reverberate around the globe.
But the plan, which Mr Paulson urged Congress to approve in a matter of days, is already stirring up controversy that is likely to build during the week. While few question the need for drastic measures, gaining consensus on just which ones are needed could quickly turn into a political football in the run-up to a presidential election. Alan Greenspan, the once-revered central banker, called the ban on short selling a "terrible idea", while a powerful banking association took strong issue with the plan to protect mutual funds, which could now offer higher guaranteed returns than bank deposits.
Democrats, while generally supportive, increasingly looked for ways to put their own stamp on the program. They are likely to push for more help for homeowners and more pain for wealthy investors. "I want to make sure there's something in it for Main Street as well as Wall Street," said Charles Schumer, a Democratic senator from New York.
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Our legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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Skewed figures
In the village of Mevagissey in southwest England the housing stock has doubled in the last century while the number of residents is half the historic high. The village's Neighbourhood Development Plan states that 26% of homes are holiday retreats. Prices are high, averaging around £300,000, £50,000 more than the Cornish average of £250,000. The local average wage is £15,458.
RESULT
Wolves 1 (Traore 67')
Tottenham 2 (Moura 8', Vertonghen 90 1')
Man of the Match: Adama Traore (Wolves)
Tips for taking the metro
- set out well ahead of time
- make sure you have at least Dh15 on you Nol card, as there could be big queues for top-up machines
- enter the right cabin. The train may be too busy to move between carriages once you're on
- don't carry too much luggage and tuck it under a seat to make room for fellow passengers
In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
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The specs
Engine: 4-litre twin-turbo V8
Transmission: nine-speed
Power: 542bhp
Torque: 700Nm
Price: Dh848,000
On sale: now
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
