Financial Roundup: Greenspan Speaks, Goldman Cuts, Hedge Fund Woes And More
Former Fed Chairman Greenspan speaks -- Appearing before a House committee investigating the nation's financial crisis, Alan Greenspan said the economy is "in the midst of a once-in-a century credit tsunami" but expressed confidence the $700 billion federal bailout will ease the storm. Greenspan added that he was "shocked" the financial system broke down, saying he thought lenders would police themselves better than regulators. [Source: CNNMoney.com].
Goldman takes hatchet to staff -- Fearing a steep revenue drop and loss of investment banking business, Goldman Sachs is laying off 3,200 people, about 10 percent of its global staff. Meanwhile, Merrill Lynch is expected to cut more than 10,000 jobs after its acquired by Bank of America. [Source: Bloomberg]
Hedge fund shake-out -- For the first time, the hedge fund industry is shrinking. Worldwide, the number of these funds dropped by 217 during the last three months, to 10,016, according to Hedge Fund Research. Meanwhile, hedge fund redemptions are growing. [Source: New York Times.]
GM slams brakes on 401(k) matches -- Automaker General Motors is suspending matching payments to employee 401(k) plans as of November 1. The company is looking to conserve cash but may reinstate the match sometime in the future. [Source: Reuters]
Taking aim at credit ratings agencies -- The three top credit ratings agencies are under fire for contributing to the financial crisis by recommending dangerous debt risks. The agencies, including Standard & Poor's, Moody's and Fitch, came under attack Wednesday before a House committee investigating the financial crisis. Confidential documents obtained by the comittee show that Raymond W. McDaniel, CEO of Moody's, wrote last year that "we drink the kool aid" as ratings agencies scrambled to supply approvals to dubious debts. The agencies were accused of greatly underestimating the risks of subprime mortgages and the collateralized financial products that were based on them. When the risks became evident as borrowers defaulted, the agencies launched a wave of ratings downgrades that created a dangerous spiral worsening the financial crisis. [Source: Washington Post]