House Rejects Bailout Package, 228-205; Stocks Plunge

By CARL HULSE and DAVID M. HERSZENHORN

WASHINGTON — In a moment of historic import in the Capitol and on Wall Street, the House of Representatives voted on Monday to reject a $700 billion rescue of the financial industry. The vote came in stunning defiance of President Bush and Congressional leaders of both parties, who said the bailout was needed to prevent a widespread financial collapse.

The vote against the measure was 228 to 205, with 133 Republicans joining 95 Democrats in opposition. The bill was backed by 140 Democrats and 65 Republicans.

House Rejects Bailout Package, 228-205; Stocks Plunge....

FDIC Announces Citigroup to Buy Wachovia

By Binyamin Appelbaum, Neil Irwin and Howard Schneider
Washington Post Staff Writers

Citigroup has agreed to buy Wachovia bank in a deal backstopped by taxpayers and brokered by the Federal Deposit Insurance Corporation to avoid another major corporate failure in the midst of the ongoing financial crisis.

Citigroup will pay the Charlotte-based Wachovia about $2.16 billion, or $1 per share, for its banking operations. Wachovia will retain its wealth management and brokerage operations.

The deal boosts Citigroup as a third rival for Bank of America and J.P. Morgan Chase in the new category of financial behemoths that are emerging from the current financial crisis. Those three banks will now control almost a third of the nation's deposits.

FDIC Announces Citigroup to Buy Wachovia....

The Real Costs of the Bailouts

Last week, as federal regulators seized Washington Mutual in the largest U.S. banking failure, Congress was grappling with whether to spend $700 billion of public money to fix the financial industry's troubles.

Lawmakers' initial reaction to the Treasury Department's staggering request: shock. That sum amounts to about a quarter of the U.S. government's annual spending. It's more than the Pentagon's annual budget, more than the nation pays out each year in Social Security benefits and more than the federal government's cost for Medicare and Medicaid.

The Real Costs of the Bailouts....

Big payoffs off table for Morgan Stanley, Goldman

NEW YORK (Associated Press) - The reorganization of Morgan Stanley and Goldman Sachs marks a historic end to a period of investment banks driving Wall Street and leaves open what _ if anything _ will assume the role of taking big risks that have powered the market's booms and busts.

The move to convert to a commercial bank structure will help the two companies avoid the fates of Bear Stearns, Lehman Brothers and Merrill Lynch by giving them broader access to borrow federal money and the ability to build a stable base of deposits.

But it also likely means an end to the sky high profits that were topped by few other companies. The strict rules set by the Federal Reserve will limit opportunities for big payoffs from bets on the price of oil and other investments usually funded with borrowed money.

"The Fed is a much more intrusive regulator," said Brad Hintz, an analyst with Sanford C. Bernstein and a former chief financial officer at Lehman Brothers.

Investment banks provided a wide variety of services from managing initial public offerings to repackaging and selling various forms of debt to trading of stocks and bonds.

They profited from deals completed with borrowed money and took risks that commercial banks either opted not to or were unable to because of regulations.

The absence of stand-alone investment banks will leave a void in proprietary trading, which is when a financial company uses its own money or borrowings instead of clients' cash to complete trades. Those units _ which were often responsible for making billions or losing billions _ placed big bets on interest rate changes and commodities prices.

The investment banks had been the biggest players in such trading. Now, experts expect smaller companies _ including private equity firms and hedge funds _ to take their place.

Big payoffs off table for Morgan Stanley, Goldman....

U.S. Treasury Department Fact Sheet on Plan to Buy Assets

(Bloomberg) -- The U.S. Treasury today issued the following statement on its proposed proposed authority to purchase troubled assets:

The Treasury Department has submitted legislation to the Congress requesting authority to purchase troubled assets from financial institutions in order to promote market stability, and help protect American families and the US economy. This program is intended to fundamentally and comprehensively address the root cause of our financial system's stresses by removing distressed assets from the financial system. When the financial system works as it should, money and capital flow to and from households and businesses to pay for home loans, school loans and investments that create jobs. As illiquid mortgage assets block the system, the clogging of our financial markets has the potential to significantly damage our financial system and our economy, undermining job creation and income growth. The following description reflects Treasury's proposal as of Saturday afternoon.

U.S. Treasury Department Fact Sheet on Plan to Buy Assets....

Gold surges, pulls back in response to credit news

By STEVENSON JACOBS

NEW YORK (AP) — Gold briefly shot above $900 an ounce Thursday as panicky investors poured money into safe-haven assets, but the metal later gave back its gains on a report that the government may move more aggressively to steady the teetering financial system.

Gold had gained over $110 in a frenzied two-day rally, including the largest ever one-day price advance on Wednesday. But late Thursday, after regular gold trading ended, investors began selling and shifting money back into stocks on a report that the U.S. government may create an entity to absorb banks' bad loans.

Gold for December delivery jumped as much as $75.50, or 8.8 percent, to $926 an ounce on the New York Mercantile Exchange before easing back to settle at $897, still up $46.50. In aftermarket trading, prices fell $36.30 to $860.70 an ounce.

On Wednesday, gold rose as much as $90 before settling $70 higher at $850.50 an ounce, the biggest one-day jump ever.

Gold had languished for months, but found new life this week as turmoil in the financial sector dramatically increased with the bankruptcy filing of Lehman Brothers Holdings Inc. and the government's bailout of American International Group Inc. The metal regained its appeal as a safe haven in rocky economic times.

Gold surges, pulls back in response to credit news....

MidAmerican Energy to buy Constellation for $4.7B

By MARK WILLIAMS

Warren Buffett's Berkshire Hathaway Inc. is reaching into its deep pockets to give a steady hand to Constellation Energy Group Inc. and, at the same time, grab a bargain.

Berkshire's MidAmerican Energy Holdings Co. said Thursday that it will buy Constellation for $4.7 billion and give it an immediate $1 billion infusion after shares of the nation's largest wholesale power seller plummeted and liquidity concerns had analysts worried it would go out of business.

"Obviously we're in unprecedented times," MidAmerican President and CEO Gregory Abel said. "Liquidity and solvency issues are a top priority for many companies. We don't have any of those concerns, again, at MidAmerican and Berkshire."

Des Moines, Iowa-based MidAmerican will pay $26.50 per share in cash for Baltimore-based Constellation, well off the utility's 52-week high of $107.97 reached Jan. 8. The shares traded as high as $67.87 last week before hitting a low of $13 Tuesday.

Constellation shares fell 57 cents, or 2.3 percent, to $24.20 Thursday.

The companies planned to sign a definitive agreement by the end of business Friday, and Constellation will receive $1 billion by giving MidAmerican preferred equity, the companies said.

MidAmerican Energy to buy Constellation for $4.7B....