Panic grips world's markets

The US government's $700bn bail-out of the banking industry collapsed yesterday as Congress defied the White House by voting down the plan, sending Wall Street stocks plummeting and spreading shockwaves through the global economy.

In a snub to President George Bush's authority, Republicans in the House of Representatives led a rebellion which defeated the rescue scheme by a knife-edge margin of 228 votes to 205.

As alarm mounted on Wall Street about the stability of the financial system, the Dow Jones Industrial Average plunged by 777 points to 10,365 - its biggest percentage fall for seven years and its worst drop ever in terms of points.

The package was intended to allow the government to buy toxic mortgage-related liabilities from banks. Financial experts had warned that without action banks would curtail home loans, car loans and student loans, as well as short-term credit crucial to keeping small firms trading.

Bush, who had spent the morning telephoning wavering Republicans in Congress, made a terse statement expressing "disappointment" and pledged to develop a strategy to "continue to address this economic situation head on". The treasury secretary, Henry Paulson, said he would work on an alternative plan: "This is much too important to simply let fail."

Although most Democrats in the House backed the plan, two-thirds of Republicans voted against it. Many attacked it as a perversion of free-market economics and a departure from Reagan-style liberalism.

As recriminations began, Republican leaders blamed the Democratic speaker of the House, Nancy Pelosi, for framing the economic crisis as a consequence of reckless management by the Bush administration. "The speaker had to give a partisan voice that poisoned our conference," the Republican leader, John Boehner, said.

This was greeted with ridicule by the Democrats. Barney Frank, chairman of the House financial services committee, said: "Somebody hurt my feelings so I'll punish the country? That's hardly plausible."

The negative vote is a blow to the Republican presidential candidate, John McCain, who briefly suspended his campaign last week to try to broker an agreement. He urged fresh efforts to find a deal, saying: "Now is not time to fix the blame - it's time to fix the problem."

On Wall Street, there were groans as traders gathered around television monitors to watch the vote. "Everybody stood their with their mouths open," said Sal Catrini, an executive director at JP Morgan in New York, who predicted that uncertainty would send stocks plunging. "We're seeing real selling, but no buyers."

Fourteen commercial banks have gone bust so far this year, and yesterday another troubled high-street name, Wachovia, was rescued in a takeover by Citigroup. In a Gallup poll for USA Today, 33% of Americans said they believed the country was in a depression.

The Mortgage Bankers' Association reacted by warning of job losses as banks curtail credit to small businesses. Larry Fink, chairman of a leading US investment management firm, BlackRock, said critics had been wrong to characterise the plan as a bail-out of Wall Street. "This is a bail-out of Main Street," he said. "Banks have no ability to lend at the moment because their balance sheets are so gummed up."

The financial fallout was swift and brutal. Shares in America's leading banks slumped - Bank of America by 16%, Citigroup by 12% and Goldman Sachs by 11%. The price of oil plunged by $10 a barrel to just over $96 as traders bet on an economic slump reducing the need for fuel. The dollar fell sharply and the price of gold surged close to record territory.

Peter Morici, professor of business at the University of Maryland, said: "Things are going to get so bad something will have to be done in the next few weeks. Banks will sink, credit markets will seize, the economy will go into something much worse than a recession."

Source : http://www.guardian.co.uk
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China Seeks to Calm Fears Amid Scandal

China on Saturday sought to calm public anxiety about a nationwide milk safety scandal as officials ordered the removal of all tainted supplies from stores, promised more scrutiny of dairy producers and issued warnings against price gouging. Meanwhile, President Hu Jintao scolded local officials as failing to safeguard the public interest.

The broad response underscores how deeply the dairy crisis has resonated with the Chinese public as well as the political problem the scandal has presented for the government, which only last year promised to revamp the country’s food and drug regulatory system after a string of controversies.

The scandal was initially limited to contaminated baby formula, which has killed four infants and sickened more than 6,200 others. Inspectors have discovered that 22 dairy companies produced batches of formula tainted with melamine, an industrial additive used to make fertilizers and plastics. In recent days, traces of melamine have also been discovered in some batches of liquid milk and in a frozen yogurt bar in Hong Kong.

The dairy sections of many grocery stores in major cities are now mostly empty from recalls. Consumers are rushing to buy foreign brands of boxed milk. Also, Starbucks franchises in China have switched to soy milk.

The Chinese news media have publicized brands of milk that have been tainted, a list that includes the country’s biggest dairy companies. Nearly 10 percent of the milk tested from two leading brands — Mengniu and Yili — revealed traces of melamine.

For days, parents have crowded into hospitals around the country to have their infants tested for the kidney problems that have occurred in babies who drank the contaminated milk over a sustained period.

On Saturday, the Ministry of Health ordered that all 31 provinces and major cities establish telephone hot lines to provide information and help.

The State Council, China’s cabinet, has promised to punish lawbreakers and to require companies that produced tainted milk products to pay for victims’ medical costs.

Meanwhile, Mr. Hu urged members of the Chinese Communist Party to “make self-improvement” during a speech at a party meeting in Beijing, according to Xinhua, the country’s official news agency. Mr. Hu said various work and food safety “accidents” this year “had indicated that some leaders lacked a sense of responsibility and had a loose governance.”

Mr. Hu did not mention the milk scandal, but the timing of his comments hardly seemed coincidental. Officials have blamed the dairy industry for the crisis, but many people on the Internet have also criticized the failure of the government’s regulatory system. Japan, Singapore and Hong Kong have all recalled any dairy products made in China.

Source : http://www.nytimes.com
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Jennifer Hudson's new reality: She's engaged to David Otunga

Is Jennifer Hudson's life turning into a reality show?

The "American Idol" winner just got engaged Friday night -- on her birthday -- to her boyfriend (of less than a year) David Otunga, also a reality TV star. Of sorts.

You may recall David Otunga, or you may not, from his appearance last year as "Punk" in the VH1 reality show "I Love New York 2."

If you watched the show, then you know that the Oscar-winning "Dreamgirls" actress is going to marry a guy who was rejected on the show by a woman named New York who was also rejected -- twice -- by Flavor Flav on his own reality love show called "Flavor of Love."

Ouch.

Maybe Hudson knows all too well the intricate and secretly scripted play-to-the-camera aspects of reality TV. Maybe that's why she's not bothered by New York rejecting her fiance.

Jen's got a lot going on in her life right now. She's engaged, has a wedding to plan, has a new album out and her new movie, "The Secret Life of Bees," is due in theaters Oct. 17.

To see Jennifer's hot new fiance doing some bench presses, watch this video excerpt from "I Love New York 2."

Source : http://latimesblogs.latimes.com
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