The cause for the market skid was a French bank announcing that it was freezing 3 funds that invested in United States sub-prime mortgage market.
 
The announcement by BNP Paribas raised the specter of a widening impact of U.S. credit market problems. The idea that anyone — institutions, investors, companies, individuals — can’t get money when they need it unnerved a stock market that has suffered through weeks of volatility triggered by concerns about tight credit and bad subprime mortgages.

A move by the European Central Bank to provide more cash to money markets intensified Wall Street’s angst. Although the bank’s loan of more than $130 billion in overnight funds to banks at a low rate of 4 percent was intended to calm investors, Wall Street saw it as confirmation of the credit markets’ problems. It was the ECB’s biggest injection ever.

The Federal Reserve added a larger-than-normal $24 billion in temporary reserves to the U.S. banking system.

The concerns that arose in Europe and spilled onto Wall Street underscored the potential worldwide ramifications of an implosion of some subprime loans and perhaps also weakened arguments that strength in the global economy could help keep profit growth going in the U.S. among large companies that do business overseas.

The ECB’s injection of money into the system is an unprecedented move, said Joseph V. Battipaglia, chief investment officer at Ryan Beck & Co., adding that it shows that problems in subprime lending are, in fact, spreading into the general economy.

“This is a mini-panic,” he said. “All the things that had been denied up until this point are unraveling. On top of this, retail sales were mediocre, which shows that indeed, the housing collapse is affecting the consumer.”

Retailers released July sales figures Thursday that were overall disappointing.

The Fed didn’t soften its stance on inflation after leaving short-term interest rates unchanged Tuesday. However, the renewed credit market concerns spurred bond traders who bet on its next move to predict that the Fed will cut rates at its meeting next month. Before Thursday, traders had bet on a 1 in 4 chance of such a cut.

The Dow fell 387.18, or 2.83 percent, to 13,270.68.

Thursday’s pullback continued an erratic pattern of triple-digit moves in the Dow since the index closed at a record 14,001.41 on July 19. Eleven of the 15 ensuing sessions have ended in a triple-digit gain or loss. Gains have been evaporating at the first mention of trouble in housing, subprime lending or the credit markets.

With Thursday’s decline, the Dow is about 730 points, or 5.2 percent, below its record close. Some experts have been calling for a textbook correction — a pullback of at least 10 percent. At its lowest close since the market’s high, Friday’s finish of 13,181.91, the Dow was 5.85 percent below the record.

Bonds rose sharply Thursday as investors again sought the relative safety of Treasurys, pushing down the yield on the benchmark 10-year note to 4.79 percent from 4.89 percent late Wednesday.

The broader Standard & Poor’s 500 index fell 44.40, or 2.96 percent, to 1,453.09.

Before Thursday, the S&P had its best three-day winning streak in nearly five years. But the latest pullback was the biggest point drop and percentage loss for both the Dow and the S&P since a market decline on Feb. 27., that owed in part to concerns about subprime loans.

The Nasdaq composite index fell 56.49, or 2.16 percent, to 2,556.49. On Wednesday, it posted its biggest point gain in more than year. And while Thursday’s loss was sharp, last Friday’s was more severe.

Despite Thursday’s slide, the major market indexes are still up for the week, given that stocks rose sharply the first three sessions of the week.

The pullback came after a BNP Paribas unit said it was suspending three funds together worth about $3.79 billion and wouldn’t make investor redemptions until it could determine net asset values.

The funds invest in part in subprime mortgages through a process known as securitization. Investment banks bundle together mortgages — including those from subprime borrowers — and sell them off to investors such as hedge funds, mutual funds and other institutional investors. Buyers of such securities are seeking the steady flow of income from homeowners making their mortgage payments.

“It just kind of brought the fear back,” said Douglas Peta, market strategist at J.& W. Seligman in New York.

“In the last couple of days I think people maybe thought that an all-clear had been sounded,” he said referring to some of the subprime loan concerns.

“This just highlights that there is not going to be an immediate resolution,” he said of the companies that are trying to determine their exposure to bad subprime loans.

Shares of financial companies, which investors have fled recently amid lending concerns, took another beating Thursday. Citigroup Inc. fell 5 percent, as did fellow Dow component JPMorgan Chase & Co.

In another sign of credit market trouble, Home Depot Inc. warned that the sale of its wholesale business might bring in less than expected. The world’s largest home improvement retailer, which also cut how much it intends to pay to repurchase stock, said volatility in the stock, debt and housing markets has led to the possible repricing. Home Depot fell $2.01, or 5.3 percent, to $35.79, and was the worst performer of the 30 Dow components.

But American International Group Inc., one of the world’s largest insurers, on Thursday reassured investors that it remains comfortable with its exposure to the subprime lending market as an investor, lender and mortgage insurer. AIG, which reported a 34 percent jump in second-quarter profit late Wednesday, said it has enough cash and liquidity and “does not need to liquidate any investment securities in a chaotic market.”

AIG fell $2.18, or 3.3 percent, to $64.30, however.

The dollar was mixed against other major currencies, while gold prices fell. Light, sweet crude fell 56 cents to $71.59 per barrel on the New York Mercantile Exchange.

Declining issues outnumbered advancers by about 4 to 1 on the New York Stock Exchange, where consolidated volume came to a heavy 5.76 billion shares compared with 5.3 billion shares traded Wednesday.

The Russell 2000 index of smaller companies fell 10.79, or 1.36 percent, to 784.87.

The Chicago Board Options Exchange’s volatility index, often called the “fear index,” rose Thursday to its highest level since April 2003.

European stocks plunged. Britain’s FTSE 100 lost 1.92 percent, Germany’s DAX index fell 2.00 percent, and France’s CAC-40 fell 2.17 percent after being down more than 3 percent. Japan’s Nikkei stock average rose 0.83 percent. Hong Kong’s Hang Seng index fell 0.43 percent.

Source: Yahoo Finance

This is an excellent article from the Kip on financial account security for Americans. Fraud is bad, but it’s getting tougher for the crooks to wiggle their way into your
accounts for total domination. Read on…

Story…

Memorizing a password just does not cut it anymore. Before you access a Bank of America account online, you’ll be asked to verify an identifying image (say, a chess piece or some other object) and a phrase that pop up when you log in.

E*Trade Financial offers a gadget that works like a digital decoder ring to unlock your account information. Wachovia might ask you for the name of your high school mascot before letting you pull up your bank statement. And some financial firms are experimenting with anti-fraud devices that will take your fingerprint or scan your iris to protect your identity and your money.

Blame financial regulators for the added inconvenience. It’s part of an effort to combat identity fraud, which cost the economy a total of $49 billion last year, according to Javelin Strategy & Research.

About 3.7% of U.S. adults were victims of identity fraud in 2006. That percentage was actually down a bit from 2005, perhaps because regulators have required banks to improve online security to make sure you are who you say you are when you log in. And many other financial firms are beefing up their defenses as well. “By the end of the year, the security process will be very different,” says Gwenn Bezard, a research director at Aite Group, which studies online security.

Cyber armor. Companies can select the kind of cyber armor they wear, and Bank of America, ING Direct and Vanguard are up front about their choice: They require you to select an image and a phrase that will appear on your computer screen before you type in your password. If you log on and the image and phrase aren’t the ones you chose, you may have been directed to a fake Web site designed to steal your personal information.

Wachovia’s security is more subtle. Each time you log on to a Wachovia account, bank software rates the risk that you could be a crook. Use your home computer and you’re likely to get hassle-free access. Log on from an Internet cafe in Hoboken, N.J., then from one in Boston, and you’ll probably have to cough up some personal details, such as the name of a favorite childhood pet.

A number of sites call on your people-watching skills. Web-security company Passfaces created an authentication system, adopted by Midwest Independent Bank, that features Brady Bunch-like groups of nine faces. You select three of the faces when you register your account, and you must recognize them in sequence each time you sign on.

Sometimes extra protection comes in small packages. E*Trade customers can request a device called a Digital Security ID, which is small enough to attach to your key chain and spits out a six-digit code when you log on. The number sequence changes every 60 seconds to prevent thieves from stealing your code. Customers who trade more than 30 times every three months get a free Digital Security ID; otherwise, the device costs $25.

Biometric identification — the scanning of eyes or fingerprints — is also in use. At a dozen branches in Utah and Idaho, Zions Bank is testing a system that lets customers cash checks if they are willing to use their fingerprints to identify themselves.

Will it work? All the extra fuss may not make our money any safer. When researchers at Harvard University and the Massachusetts Institute of Technology studied the anti-fraud image system used by Bank of America, they found that 58 out of 60 users still logged on to a phony Web site that did not display the images that the users had selected. The system raises the bar for criminals, says Rachna Dhamija, one of the researchers who conducted the study, but “if users don’t comply, it’s entirely ineffective. They are going to be giving out their credentials to the wrong Web sites.”

But let’s face it: It’s tough to remember images in addition to multiple codes and user names. To help, a number of software programs — Password Agent ($25), Handy Password ($30) and RoboForm Pro ($30) — track all your passwords and stow them in a protected file on your computer or hand-held device. Of course, you’ll have to create yet another password and user name to access their protected files.

No matter how sophisticated it is, no single online-security measure is scam-proof. Even biometric gadgets and high-tech code keys can be thwarted. David Cowan, co-founder of VeriSign, an Internet-security firm, says that many crimes could be prevented if banks simply made phone calls to account holders to confirm unusual or suspicious online activity — such as transfers of large sums of money to other accounts or changes to mailing addresses for accounts.

[Source Kiplinger.com]

Related Video…NY Credit Card Identity Theft Bust

1) Have a sound business plan. Having a solid business plan is your best shot at getting a loan. But it also must be a complete and well-presented plan. It’s especially important to polish your executive summary. This one- to three-page summary of your business is what bankers look at first — if they like what they see, they might read on.

2) Invest your own money. Another way to improve your chances of getting a loan is to put some of your own money on the line.

3) Lenders typically like to see that owners have at least a 25 percent equity stake in the businesses they finance. Rent, don’t buy. Bankers also favor businesses that plan to rent rather than purchase a building. That’s because lenders prefer that you invest in assets that generate income, like inventory and equipment. Bankers also frown on high renovation costs.

4) Check out your credit report. Reviewing your own credit report before you start the application process can also put you ahead of the game. Lenders use your personal credit history to help them decide whether you’re a good risk for a loan, so it pays to know what they’ll find. If your report shows a mistake, contact the credit reporting agency and demand a correction.

If your credit report shows legitimate late payments or bankruptcies, you should include a letter with your application explaining the circumstances and how they’ve changed. This can soften the impact of these black marks against you. Always be honest about your credit history — covering up problems is the fastest way to get shown the door.

5) Explore local banks. Don’t assume the bigger the bank, the better your chances of getting a loan. Smaller community banks might be more inclined to finance businesses in their areas, and their loan officers are more likely to give you individual attention.

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Payday lenders can charge up to 800 percent interest, and their business model is designed to keep you in debt.

Click here for a PDF viewing of the Board’s Order relating to this action.