Top congressional and White House officials, stunned when the House rejected a massive rescue plan for the nation’s economy, scrambled to structure a new bailout proposal that would attract reluctant lawmakers and still soothe the unnerved financial markets.

“Doing nothing is not an option,” House Majority Leader Steny Hoyer, D-Md., said after seeing the $700 billion emergency package for the nation’s financial systems fail 228-205 on Monday.

With the House not scheduled to meet again until Thursday, congressional leaders and Bush administration officials promptly sought to assess what types of changes could win over enough votes to guarantee success. President Bush planned to make a statement on the rescue plan at 8:45 a.m. EDT Tuesday.

In the latest byproduct of the widening global financial crisis, Citigroup Inc. will acquire the banking operations of Wachovia Corp. in a deal facilitated by the Federal Deposit Insurance Corp.

Citigroup will absorb up to $42 billion of losses in the deal, with the FDIC covering any remaining losses, the government agency said Monday. Citigroup also will grant the FDIC $12 billion in preferred stock and warrants.

The deal greatly expands Citigroup's retail outlets and leaves it among the U.S. banking industry's Big Three along with Bank of America Corp. and J.P. Morgan Chase & Co.

The deal comes after a fevered weekend courtship in which Citigroup and Wells Fargo & Co. both were reportedly studying the books of Wachovia, which was suffering from mounting mortgage losses linked to its ill-timed 2006 acquisition of mortgage lender Golden West Financial Corp.

Read the full story here on the Yahoo! website.

Former American International Group Inc. chief executive Maurice "Hank" Greenberg intends to sell his AIG stock, according to a regulatory filing on Thursday.

Greenberg, who ran AIG for nearly four decades, said he plans to sell shares of the New York-based insurer for "liquidity and other purposes," according to a filing with the Securities and Exchange Commission.

Greenberg will sell the stock in the open market, and the sales may "materially" decrease the holdings that he controls, according to the filing.

Greenberg, through a personal stake, family trust and companies that he controls, owns more than 10% of AIG, making him its largest shareholder before the company agreed to a federal bailout that will give the government 80% ownership.

Late Tuesday, AIG said it signed a definitive agreement with the Federal Reserve Bank of New York for a two-year, $85 billion emergency loan at an interest rate of about 11.5%. AIG had teetered on the edge of failure because of stresses caused by the collapse of the subprime mortgage market and the credit crunch that ensued.

Shares of AIG fell 20 cents or 6% to $3.11 in afternoon trading Thursday.

This story is from the AP.

As the debate over a $700 billion bank bailout rages on in Washington, one of the nation's largest banks — Washington Mutual Inc. — has collapsed under the weight of its enormous bad bets on the mortgage market.

The Federal Deposit Insurance Corp. seized WaMu on Thursday, and then sold the thrift's banking assets to JPMorgan Chase & Co. for $1.9 billion.

Seattle-based WaMu, which was founded in 1889, is the largest bank to fail by far in the country's history. Its $307 billion in assets eclipse the $40 billion of Continental Illinois National Bank, which failed in 1984, and the $32 billion of IndyMac, which the government seized in July.

Read the full story here on the Yahoo! Website.

The U.S. property/casualty industry's net income after taxes fell more than 50 percent to $15.9 billion in the first half of 2008 on a combination of deteriorating underwriting results and declining investment returns. As a result, the U.S. property/casualty industry's annualized after-tax return on equity (return on surplus) -- which measures overall after-tax profitability from underwriting and investment activity -- fell to 9.5 percent for the 12 months ended June 30, 2008, from 14.2 percent for the 12 months ended June 30, 2007.

Net premiums written declined approximately $1.6 billion, or 0.7 percent, to $224.3 billion through the first half of 2008 from $225.9 billion during the same period of 2007.

The FBI is investigating four major U.S. financial institutions whose collapse helped trigger a $700 billion bailout plan by the Bush administration, The Associated Press has learned.

Two law enforcement officials said Tuesday the FBI is looking at potential fraud by mortgage finance giants Fannie Mae and Freddie Mac, and insurer American International Group Inc. Additionally, a senior law enforcement official said Lehman Brothers Holdings Inc. also is under investigation.

The inquiries will focus on the financial institutions and the individuals that ran them, the senior law enforcement official said.

Read the full story here on the MSNBC website.

The Securities and Exchange Commission took the dramatic step early Friday of temporarily banning the routine practice of betting against company stocks.

The move, announced on the agency’s Web site, may well be unprecedented and a reflection of regulators’ concern about the widening scope of the financial crisis as entreaties come from all quarters to stem a swarm of short-selling.

Morgan Stanley topped the list of major financial firms scrambling to find a buyer, while central banks rushed in $180 billion of extra liquidity to bring some calm to panicked stock and money markets.

Morgan Stanley was discussing a deal with U.S. regional banking powerhouse Wachovia, according to a source familiar with the matter, while CNBC said HSBC Holdings and China's CITIC Group were also eyeing Wall Street's second-largest investment bank.

Morgan Stanley shares were up 5 percent in trading before the New York Stock Exchange opened.

Despite a lot of skepticism early in the day from Congressmen, including Banking Committee Chair Senator Christopher Dodd the Federal Reserve Board is bailing out AIG. The Fed authorized the Federal Reserve Bank of New York to lend up to $85 billion to the strapped insurer. In a statement the board said that “in current circumstances, a disorderly failure of AIG could add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth and materially weaker economic performance.”

In exchange for their largess, the U.S. government will receive a 79.9 percent equity interest in AIG.

Stocks turned higher Tuesday after CNBC reported that the government is considering extending aid to troubled insurer American International Group Inc.

A partial recovery in shares of AIG and several other financial companies helped the sector show signs of life a day after leading Wall Street to its worst session in years. Investors also grew hopeful about a Federal Reserve interest rate cut.

The insurance business is all about risk—understanding it, minimizing it, pricing to compensate for it. But American International Group, the biggest insurance company in the world, seems to have had very little concept of the risk it held in its own businesses.

Now, AIG has emerged as the latest victim of the meltdown in the credit markets, reeling from a seemingly endless escalation in what it could owe on transactions involving mortgage-backed securitizations. On Sept. 15, management spent the day in a desperate bid to get help covering those obligations from government sources and other institutions. As the markets closed, its stock slid to $4.76 a share, down from a 52-week high of $70 a share, representing the evaporation of $176 billion in market value in less than one year. While regulators were racing to find some kind of capital infusion that could keep the company standing, ratings agencies slashed AIG's credit rating, making it much more expensive for the insurer to do business.

Three major credit agencies lowered their ratings Monday for American International Group Inc. (AIG), dashing hopes to save one of the one world's biggest insurance companies amid a burgeoning financial crisis.

The downgrades likely looked to sound the death knell for AIG, making it harder for the U.S. insurance giant to raise the cash needed to deal with its own liquidity crisis.

Standard & Poor's Ratings Services lowered its long-term counterparty rating to 'A-' from 'AA-' and its short-term counterparty credit rating on AIG to 'A-2' from 'A-1+,' according to a statement.

When Wall Street woke up Monday morning, two more of its storied firms had fallen.

Lehman Brothers, burdened by $60 billion in soured real-estate holdings, filed a Chapter 11 bankruptcy petition in U.S. Bankruptcy Court after attempts to rescue the 158-year-old firm failed. Bank of America Corp. said it is snapping up Merrill Lynch & Co. Inc. in a $50 billion all-stock transaction.

The demise of the independent Wall Street institutions came as shock waves from the 14-month-old credit crisis roiled the U.S. financial system six months after the collapse of Bear Stearns.

The world's largest insurance company, American International Group Inc., also was forced into a restructuring.

Wall Street readied for a potential Lehman Brothers Holdings Inc. bankruptcy after Bank of America Corp. and Barclays Plc pulled out of talks to buy it and the government indicated it wouldn't provide funds to prevent a collapse. 

Banks and brokers today held a session for netting derivatives transactions with Lehman, or canceling trades that offset each other, in case the New York-based firm files for bankruptcy before midnight. 

``The purpose of this session is to reduce risk associated with a potential Lehman'' bankruptcy, the International Swaps and Derivatives Association said in a statement today. The ISDA includes 218 banks, brokerages, insurance companies and other financial institutions from the U.S. and abroad. 

The step indicates Wall Street lacks confidence that three days of talks to find a buyer for Lehman, held at the Federal Reserve Bank of New York, will be successful. Treasury Secretary Henry Paulson, who has led the talks with New York Fed President Timothy Geithner, was adamant two days ago against using taxpayer funds to help a purchaser take Lehman over.

Developers putting green roofs on their buildings may have to think again after one of the world’s largest insurers declared they were a fire risk.

Swiss insurer Zurich, the third largest insurer of commercial property in the UK, said the roofs could dry out and become flammable. Green roofs have been promoted as one of the best ways to green new buildings and, last week, London mayor Boris Johnson put them at the heart of the capital’s climate change mitigation strategy.

Stuart Blackie, risk management consultant at Zurich, said he was concerned the roofs “would become a hazard in a period of drought, particularly on school buildings”. Many green roofs contain sedum, which is a succulent plant, but Blackie said other plants tend to dry out in the summer months.

Read the full story here on the Building.UK website.

Federal prosecutors in Connecticut have asked a judge to commit five former insurance executives convicted earlier this year of a scheme to manipulate the financial statements of insurance giant American International Group Inc. to “a substantial period of incarceration.”

In court papers filed Sept. 5, the government argued that a pre-sentence report's recommendation -- prepared by a probation officer -- of 168 to 210 months of imprisonment for each defendant is inadequate punishment. The prosecutors want a substantial increase in the offense level assigned to each defendant as required under federal statutes.

Prosecutors took issue with the report’s conclusion that the financial loss in the case cannot be reasonably determined. They cited their own loss causation expert’s finding, which is based on two different methodologies, that the defendants' criminal activity caused investors to lose somewhere between $543 million and $1.4 billion.

The United States remains "dangerously vulnerable" to chemical, biological and nuclear attacks seven years after 9/11, a forthcoming independent study concludes. And a House Democrats' report says the Bush administration has missed one opportunity after another to improve the nation's security.

The recent political rupture between Russia and the U.S. only makes matters worse, said Lee Hamilton, the former Indiana Democratic congressman who helped lead the 9/11 Commission and now chairs the independent group's latest study.

Read the full story here on the Yahoo! News website.

PLUS is pleased to have Stephen Flynn, expert on Conterterrorism and National Security, speaking at one of the sessions of the 2008 PLUS International Conference November 5-7 in San Francisco, CA. Click here for more information.

With the nation riveted on what the next President will do, the current Administration showed on Sept. 7 that it's not ready to take its hands off the economy's steering wheel quite yet. The Bush Administration announced that it had seized control of Fannie Mae and Freddie Mac, two huge but dysfunctional companies whose financial difficulties were weighing down the U.S. housing market and threatening global financial upheaval.

It was a dramatic move for the Republican Administration. The two privately owned companies are in effect being nationalized, something that's ordinarily anathema to conservatives. Treasury Secretary Henry Paulson, who announced the action at a rare Sunday news conference, justified it by saying that Fannie and Freddie are so "large and interwoven" into the global financial system that "a failure of either would cause turmoil around the world."

Read the full story here on the BusinessWeek website.

The government is expected to take over Fannie Mae and Freddie Mac as soon as this weekend in a monumental move designed to protect the mortgage market from the failure of the two companies, which together hold or guarantee half of the nation's mortgage debt, a person briefed on the matter said Friday night.

Some of the details of the intervention, which could cost taxpayers billions, were not yet available, but are expected to include the departure of Fannie Mae CEO Daniel Mudd and Freddie Mac CEO Richard Syron, according to the source, who asked not to be named because the plan was yet to be announced.

Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson and James Lockhart, the companies' chief regulator, met Friday afternoon with the top executives from the mortgage companies and informed them of the government's plan to put the troubled companies into a conservatorship.

The news, first reported on The Wall Street Journal's Web site, came after stock markets closed. In after-hours trading Fannie Mae's shares plunged $1.54, or 22 percent, to $5.50. Freddie Mac's shares fell $1.06, or almost 21 percent, to $4.04. Common stock in the companies will be worth little to nothing after the government's actions.

Read the full story here on the Yahoo News website.

Troubled by the Bear Stearns debacle, former Federal Reserve Chairman Alan Greenspan is advocating a new way of dealing with government bailouts of companies whose sudden collapse could wreak havoc on the country's economic and financial stability.

Greenspan says Congress needs to give the government new powers to handle troubled companies to minimize any potential losses to American taxpayers. A self-described libertarian Republican, Greenspan has a reputation for being wary of giving the government extra powers. However, in crisis situations, there needs to be a clear process for handling bailouts, rather than depending on the Fed to do so, he reckons.

A high-level panel of financial officials should be given broad authority to quickly determine whether a failing company poses a sufficient threat to the entire U.S. economy, he recommends. If so, the company would be shut down.

According to Steve Forbes and other tort reformers, the medical malpractice crisis is the fault of greedy plaintiffs and rapacious lawyers. The solution: caps on noneconomic damages. Since California adopted a $250,000 cap in 1975, 23 states have followed suit.

What are the real-world consequences of such caps? The elderly, the poor, the unemployed and their surviving families are getting hurt in disproportionate numbers. Many deserving victims of medical malpractice can't even find a lawyer to represent them. Any suit that might require extensive discovery, the testimony of high-priced experts or protracted court proceedings can't get off the ground.

Read the full story here on the Forbes.Com website.

If initial insured-loss estimates are correct, Hurricane Gustav will rank among the top 10 costly hurricanes to ever affect the United States.

The largest estimate of insured loss comes from risk modeler Eqecat, which now projects onshore losses of $3 billion to $7 billion. The firm downgraded initial projections of $6 billion to $10 billion in losses. Modeler AIR Worldwide estimates an insured loss count of $2 billion to $4 billion onshore. Risk Management Solutions released an onshore estimate of $3 billion to $7 billion.

At the high end of estimated loss projections, Gustav would rank seventh in the top 10 most costly hurricanes, according to data compiled by the Insurance Information Institute and ISO's Property Claims Services Unit. Using 2007 dollars, Hurricane Hugo ranks sixth, having caused just more than $7 billion in insured loss in 1989.

Read the full article here on the Individual.com website.

The outcome of a complaint filed by a Tulsa Muslim teenager against Abercrombie & Fitch may never be made public.

The girl, assisted by the Council on American-Islamic Relations — Oklahoma, filed a complaint with the U.S. Equal Employment Opportunity Commission last month alleging that the popular clothier’s Woodland Hills store refused to hire her because she wears a religiously mandated headscarf.

Razi Hashmi, executive director of the Oklahoma CAIR office, said the store’s refusal to hire the girl was a violation of the Civil Rights Act of 1964.

EEOC attorney Michelle Robertson said her office cannot comment on any charge that is still open because of confidentiality requirements of the Civil Rights Act, and cannot even confirm that the case was filed.

In general, she said, when a complaint is filed, it is assigned to an investigator who gets information from the employer and elsewhere, and makes a recommendation to the area director.

In 5 percent of the cases, there is enough evidence to determine that discrimination occurred, she said.