Finance and Economic

A global credit crisis that has felled large investment banks and prompted multi-billion dollar bailout packages is also hurting unlikely victims half a world away: small south Asian businesses dependent on microfinance.

Microfinance has helped poor women and farmers in Bangladesh and India set up businesses and grow crops since the 1970s.

But as credit tightens and largesse from corporations and socially-minded investors dries up, microfinance will be hit, impacting poor people who have no other access to finance.

“A liquidity crisis is the very worst-case scenario for microfinance institutions,” said Roy Jacobowitz, managing director of development and communications at ACCION International in Boston, which backs microfinance institutions.

“The demise of microfinance will be devastating. It will leave people that depend on it in a very, very bad situation: they could go from a level of success back to poverty.”

South Asia accounts for the most microfinance borrowers, making up more than half of global demand, according to Sa-Dhan, an association of community development finance institutions.

While ACCION hasn’t seen a “catastrophic impact” on MFIs there yet, Kashf Foundation, an MFI in Pakistan, whose economy is tanking, is now seeking international lines of credit, he said credit score.

In India and Bangladesh, microfinance has given hope to hundreds of thousands, especially women, who have built successful businesses that have changed their lives.

But these may now be under threat because of tighter credit.

“There’s less money out there, so there’s less money for MFIs,” said Siddhartha Chowdri, a manager for ACCION in India.

“For MFIs, the cost of their funds has gone up, and at the same time, they’re under pressure not to raise lending rates to their borrowers. At some point that becomes unsustainable.”

REGULAR INCOME

Microfinance shot into the spotlight in 2006 when the Nobel Peace Prize went to Bangladesh’s Muhammad Yunus and his Grameen Bank that pioneered giving small loans without collateral.

But today in Bangladesh, one of the poorest nations in the world, microfinance borrowers and workers are a worried lot.

Kulsum Bibi, a 45-year-old mother of three, set up a nursery with a loan of 3,000 taka ($44) from Bangladesh Rural Advancement Committee (BRAC), after her husband left her and their children. 

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The Dow ended its worst week ever Friday and capped a staggering eight-session selloff that has seen the blue-chip index fall 2,400 points.

Investors could be in for another rough ride as Citigroup (C, Fortune 500) and Merrill Lynch (MER, Fortune 500) are on tap to report results this week, giving another glimpse into just how deep their losses continue to be. And a slew of economic reports are also due out, including readings on consumer spending and housing.

Much of the Dow’s loss occurred over the most recent sessions as the global credit market crisis intensfied. In fact, last week the Dow fell just over 1,874 points, or 18%. The index has lost nearly 22% over the last eight sessions, as panicked investors ditched stocks across the board.

That panic also gripped the global markets, which have seen some brutal selloffs of their own.

"The magnitude of what’s going on is unprecedented and people are frightened," said Robert Philips, senior portfolio strategist at BLB&B Advisors.

Finance ministers from the Group of Seven nations said Friday that exceptional steps were needed to ease the global financial crisis and get money flowing again.

And early Saturday, the G-7 vowed to work together to stem the criris. Later in the day, the International Monetary Fund soundly endorsed the G-7 commiment, with IMF managing director Dominique Strauss-Kahn saying the crisis "had pushed the global financial system to the brink of systemic meltdown."

Wall Street lost roughly $2.4 trillion in market value during the week, according to losses in the Dow Jones Wilshire 5000, the broadest measure of the market.

And investor fear surged to record levels, with the CBOE Volatility (VIX) index, or the VIX, hitting a record just shy of 77 Friday, before closing a bit off those levels.

The Dow Jones industrial average (INDU) ended Friday’s session down just 128 points, after falling as much as 697 points in the morning. The Standard & Poor’s 500 (SPX) index also declined Friday and for eight sessions in a row. The Nasdaq composite (COMP) ended barely higher, following seven down sessions.

Paralyzing fear. Banks have clamped down on capital, with credit markets remaining frozen and several measures of bank nervousness hitting all-time highs. Treasury prices slumped, boosting the corresponding yields as investors no longer bet that government debt was necessarily so much safer than stocks. The dollar recovered versus other major currencies. And oil, gold and other commodities plunged on bets that slowing global demand will hurt oil usage.

"Investors are the most fearful they’ve ever been," said Phil Orlando, chief equity market strategist at Federated Investors.

The heightened volatility that has left investors seasick was evident in Friday’s market. In the first five minutes of trade Friday the Dow plunged 697 points, falling below 7,900 to the lowest point since March 17, 2003. The Nasdaq and S&P also hit more than five-year lows. But stocks recovered abruptly, with the Dow erasing losses. The afternoon saw the Dow make violent swings back and forth, toppling as much as 600 points and rising as much as 322 points.

Stocks have plunged despite a series of efforts on the part of the government to unfreeze the credit markets and get money flowing through the system again.

"Fear is feeding upon itself and nothing the officials have done to this point seems to stem the tide," said Ryan Atkinson, market analyst at Balestra Capital.

Last week, the Fed announced an emergency rate cut, coordinated with banks around the world. The central bank has also pumped billions into the system. But the moves have hardly made a dent in investor sentiment.

"Central banks of the world have been flooding the markets with liquidity, but banks are hoarding cash," Atkinson said. "This is the lynchpin of the entire financial system and as long as this is still going on, the markets will be driven by fear."

On Friday, President Bush said that the government will continue to work to resolve the economic crisis to return stability to the markets. Meanwhile, House Democrats are meeting Monday to discuss a potential second economic stimulus package, although House Republicans are reportedly skeptical of a second package, CNN reports.

Looking for a bottom: Stocks have been in a bear market for most of the year, but the selling began accelerating in September following a series of bank failures and mergers.

Since hitting all-time highs a year ago, the Dow has lost just over 40% and the S&P 500 has lost 43% bad credit payday advance. The Nasdaq has not come close to reclaiming its tech-bubble record, but it did hit multi-year highs last October. Since then, the Nasdaq has fallen just over 42%.

And investors across the board are pulling money out of equities, with $43.3 billion pulled out of stock mutual funds during the week ended Oct. 8, according to TrimTabs Research.

"To some extent, we are seeing a retail investor capitulation," said Kelli Hill, portfolio manager at Ashfield Capital Partners. "And when everyone is getting out, that suggests we’re getting closer to finding a bottom," she said.

Wall Street was last in a bear market between 2000 and 2002 amid the end of the tech bubble, a recession and the terrorist attacks on 9/11. But stocks bottomed in October 2002 and then again in March 2003, leading to a more than four-year bull market.

On Friday, the three major stock gauges fell to within shouting distance of that March 2003 bottom. Some market pros are wondering if that 2003 level could turn out to be the bottom for the 2008 bear market also. (Full story)

However, bottoms are often "retested," meaning stocks fall to a low, bounce for a few days or even months, then fall back to right around that low, before making a bigger, more sustained advance off the low.

That’s what happened in the last bear market. Stocks bottomed in early October 2002, bounced a little bit in the lead up to the start of the Iraq war and then retested those lows in March of 2003 before moving higher.

Either way, the analysts spoken with agree that when the market does finally put a bottom in place, it will lead to an extensive rally.

One comfort for investors is the knowledge that there are limits to how low the Dow can go, thanks to rules put in place in the aftermath of the crash of Oct. 19, 1987, when the Dow plunged 22.6%. The NYSE has rules to halt trading if the Dow loses 10%, 20% or 30% in a single day. Trading is halted for 30 minutes, an hour or two hours, depending on the time of day. Trading is over for the day if the Dow loses 30%.

The Dow’s 22% decline roughly compares with the two-day slide in the crash of 1929. On Oct. 28, 1929, the Dow fell 12.8% and it It fell an additional 11.7% the next day, according to Stock Trader’s Almanac.

Bear vs. Bull: Looking for a bottom

Credit markets frozen: Amid the ongoing crisis, lending has dried up, making it difficult for businesses to function on a daily basis and for consumers to get loans.

The TED spread, the difference between what banks pay to borrow from each other for three months and what the Treasury pays, spiked to an all-time high of 4.65% Friday before pulling back slightly.

The wider the spread, the more reluctant banks are to lend to each other, rather than from the federal government. When markets are fairly calm, banks charge each other premiums that are not much higher than the U.S. government.

Three-month Libor, or what banks charge each other to borrow for three months, rose to a 2008 high of 4.82% Friday.

The yield on the 3-month Treasury bill, seen by many as the safest place to put money in the short term, fell to 0.24% from 0.5% Thursday, with panicked investors willing to take a piddling return on their money rather than risk stocks. Last month, the yield on the 3-month bill skidded to a 68-year low around 0%.

But in a sign that banks were willing to take a chance on near-term lending, Libor, the overnight bank lending rate, eased to 2.47% Friday from 5.09% Thursday, according to Bloomberg.com. Libor was at 2.15% a month ago.

Treasury prices slipped at the end of the week, raising the yields. The benchmark 10-year note ended Friday’s shortened session at 3.88%. Treasury bond markets closed early Friday and are closed Monday for Columbus Day.

Other markets: Oil prices plunged $8.89 a barrel Friday, the second biggest decline ever, to settle at $77.70 a barrel on the New York Mercantile Exchange, a 13-month low.

Oil prices have tumbled on bets of slowing demand since the price of crude hit an all-time high of $147.27 a barrel on July 11.

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Drugstore chain Walgreen Co. has withdrawn its $2.8 billion bid to acquire Longs Drug Stores, apparently helping to ease the path for Longs’ $2.7 billion acquisition by CVS Caremark Corp.

Longs had already accepted CVS Caremark Corp.’s lower bid of $71.50 per share, a deal already approved by antitrust regulators.

Walgreen Chief Executive Jeffrey Rein sent a letter to Longs’ board of directors informing them of Walgreen’s decision to withdraw its bid. He cited what he called Longs’ board’s refusal to "engage in a constructive dialogue" as well as the broad financial meltdown as reasons for the withdrawal.

Some had questioned whether Walgreen would face antitrust issues because of overlap between its West Coast stores and Longs’. Longs said on Sept. 26 that the Federal Trade Commission was investigating whether a Walgreen acquisition would reduce competition among retail pharmacies in parts of California, Nevada and Hawaii, where Longs has most of its stores.

Some Longs shareholders have criticized the CVS deal, saying it may undervalue Longs’ real estate.

Major shareholder Advisory Research has not decided if it will tender its shares in favor of the CVS bid but has questioned the deal direct faxless payday loans. Another major shareholder, Pershing Square Capital Research, has said it is against the CVS deal. The two firms combined own about 18% of Longs shares, and the deal requires approval from shareholders owning two-thirds of Longs stock.

Longs, based in Walnut Creek, Calif., has more than 500 stores, mostly in California, but also in Hawaii, Nevada and Arizona. The company also owns Rx America, a prescription benefits management program with more than 8 million members.

The deal would give CVS, which already has a large presence in Southern California, a deeper foothold into the northern part of that state.

Messages left with representatives of Longs and CVS were not immediately returned.

Shares of Deerfield, Ill.-based Walgreen (WAG, Fortune 500) rose 7 cents to $26.25 in after-hours trading following the announcement, while Longs (LDG, Fortune 500) shares fell $2.48 to $69.20. Shares of Woonsocket, R.I.-based CVS (CVS, Fortune 500) were unchanged after-hours after rising 71 cents to $29.84 in the regular session. 

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WASHINGTON–House members are getting another chance to vote on a financial bailout bill that has infuriated millions of voters after the Senate added tax cuts and other sweeteners and passed it handily.

Senators advanced the much-criticized measure in a 74-25 vote late Wednesday, sending it to the other side of the Capitol for a showdown vote expected Friday. The move was calculated to win over enough dissenting House members to get the bill through and reverse Monday’s stunning defeat in the House. Party leaders there planned to press rank-and-file members Thursday for the dozen converts they believe they need.

U.S. President George W. Bush will continue lobbying, too, with the argument that businesses are having a tough time financing operations and payroll and need help. A day ahead of the House vote, Bush called business leaders to the White House on Thursday to make his case for the $700-billion package.

"The president will note how important it is to pass the financial rescue legislation to help to free up credit in our economy," said White House spokesman Tony Fratto. "These business owners know the consequences if the situation gets worse, so the crisis is urgent for these businesses.”

On another front, the head of the Federal Deposit Insurance Corporation, urged people to remain calm.

"I think overall the banking system remains very sound so that’s why I think it’s so important for everybody to keep their head," commission Chairman Sheila Bair said on C-SPAN. "What I don’t want is to see otherwise healthy institutions start to get into trouble just because of liquidity pressure … Wall Street should be taking their cue from Main Street right now. Main Street deposits are staying there.”

The bailout package was never in danger in the Senate. Senators instead played catalysts for the House, adding tax provisions popular with the left and right in a bid that House leaders hope – but cannot guarantee – will persuade enough of the House rank-and-file to switch from "nay" to "aye" on a highly contentious bill a month before Election Day.

They were especially targeting the 133 House Republicans who voted against the package.

California’s David Dreier said Thursday morning that "I hated” the initial version of the bill but that he plans to vote for it this time around.

"I was very concerned with the proposal that came forward that would have allowed golden parachutes to go forward," said Dreier, a Republican. But he said he likes the new version because "it puts into place growth-oriented tax cuts.”

"I will tell you, the American people are angy and frustrated," he said on ABC’s "Good Morning America," saying he’s been hearing messages like "the woman who said she was concerned about getting access to a student loan for her daughter.”

Rep. Marcy Kaptur, an Ohio Democrat, said on the same program that she plans to vote no.

"I will not support this legislation because it’s the wrong medicine," she said. Kaptur argued that the problem should be solved by the market itself, not through governmental intervention.

After the Senate vote, Majority Leader Harry Reid, D-Nev., said, “We’ve sent a clear message to Americans all over that we will not let this economy fail. This is not a piece of legislation for lower Manhattan. This is legislation for all America.”

The rescue package would let the government spend billions of dollars to buy bad mortgage-related securities and other devalued assets held by troubled financial institutions $1500 payday loan. If successful, advocates say, that would allow frozen credit to begin flowing again and prevent a serious recession.

To some degree, at least, House GOP opposition appeared to be easing as the Senate added $100 billion in tax breaks for businesses and the middle class, plus a provision to raise, from $100,000 to $250,000, the cap on federal deposit insurance.

House Republicans also welcomed a decision Tuesday by the Securities and Exchange Commission to ease rules that force companies to devalue assets on their balance sheets to reflect the price they can get on the market.

There were worries, though, that the tax breaks might cause some conservative-leaning Democrats who voted for the rescue Monday to abandon it because the revised version would swell the federal deficit.

"I’m concerned about that," said Rep. Steny Hoyer of Maryland, the Democratic leader.

The Senate-backed package extends several tax breaks popular with businesses. It would keep the alternative minimum tax from hitting 20 million middle-income Americans. And it would provide $8 billion in tax relief for those hit by natural disasters in the Midwest, Texas and Louisiana.

Leaders in both parties, as well as private economic chiefs almost everywhere, said Congress must quickly approve some version of the bailout measure to start loans flowing and stave off a potential national economic disaster.

But critics on the right and left assailed the rescue plan, which has been panned by their constituents as a giveaway for Wall Street with little obvious benefit for ordinary Americans.

Sen. Jim DeMint, R-S.C., a leading conservative, said the step was "leading us into the pit of socialism.”

But proponents argued that the financial sector’s woes already were being felt by ordinary people in the form of unaffordable credit and underperforming retirement savings. Still, they said voters were unlikely to reward those who vote for the measure.

"There will be no balloons or bunting or parades" when the rescue becomes law, said Sen. Chris Dodd, D-Conn., the Senate Banking Committee chairman.

Tax cuts new and old are favorites for most House Republicans. Help for rural schools was aimed mainly at lawmakers in the West, while disaster aid was a top priority for lawmakers from across the Midwest and South.

Another addition, to extend the deductibility of state and local taxes for people in states without income taxes, helps Florida and Texas, among others.

Increasing the deposit insurance cap was a bid to reassure individuals and small businesses that their money would be safe in the event their banks collapsed. It was particularly geared toward small banks that fear customers will pull their money and park it in larger institutions seen as less likely to fold.

The Senate vote lacked the drama of Monday’s House vote, but it had its celebrity moments. Democratic presidential nominee Barack Obama and his GOP rival, John McCain, came off the campaign trail to vote for the package, thrilling tourists who glimpsed them in the Capitol’s corridors and drawing hordes of reporters and photographers.

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Novolipetsk Steel (NLMKq.L: Quote, Profile, Research, Stock Buzz), the Russian steel maker owned by billionaire Vladimir Lisin, has agreed to pay $400 million in cash to acquire U.S. hot-rolled steel maker Beta Steel and expand its presence in North America.

Novolipetsk, Russia’s fourth-largest steel maker by volume, said on Thursday it would buy the Portage, Indiana-based company from a group of private shareholders to provide feed for another recent U.S. acquisition, steel pipe maker John Maneely Co.

“Novolipetsk is trying its best to make its U.S. acquisitions vertically integrated and therefore less exposed to rising raw material input prices,” UniCredit Aton metals analyst Marat Gabitov said. “It will increase profitability.”

Steel makers in Russia, the world’s fourth-largest producer, have acquired around 10 percent of U.S. steel-making capacity in the last few years as they spend billions of dollars from record profits betting on steel demand in North America.

The latest deal takes Novolipetsk’s spending on U.S paydayloans. assets to nearly $4 billion in the last month, after the $3.5 billion deal to acquire John Maneely Co announced on August 13. Beta Steel will supply hot-rolled steel for John Maneely’s pipe mills.

“This acquisition is fully in line with our commitment to develop a strong footprint in the U.S. high value-added finished steel market,” Novolipetsk Steel’s president and chief executive, Alexei Lapshin, said.

The deal, which Novolipetsk will finance from existing funds and available credit lines, is expected to close in the fourth quarter of 2008.

RUSSIAN PRESENCE 

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General Motors Corp (GM.N: Quote, Profile, Research, Stock Buzz) will be able to invest more to develop cars and crossover vehicles even after $10 billion in cost cuts under a rushed restructuring that the U.S. automaker sees as the last of its kind, the company’s president said on Tuesday.

“In an uncertain market we need to be in as much in control of our own fate as possible,” GM President and Chief Operating Officer Fritz Henderson told Reuters.

Henderson, GM’s No. 2 executive, was charged by Chief Executive Rick Wagoner in June with pulling together a plan to address deepening concerns about the automaker’s ability to outlast a downturn in U.S. auto sales analysts saw as testing its $24 billion in cash reserves.

Facing high gas prices and a rush away from trucks and SUVs, GM surprised Wall Street with a plan that relies more heavily on cost-cutting than new borrowing or asset sales.

In fact, the central element of GM’s plan to shore up liquidity by $15 billion through 2009 is cutting $10 billion in additional costs payday loans. That will come through the elimination of thousands of white-collar jobs, including engineers, and a $1.5 billion cut in capital spending.

Most of the cuts stem from GM’s decision to suspend development of a new-generation of full-size trucks — a line of once highly profitable vehicles including the Chevrolet Silverado and GMC Yukon.

Although analysts credited GM with addressing the threat that it could run short on cash, some questioned whether the cost-cutting could hamstring its ability to compete in the market for more fuel efficient small cars.

“In the medium term, the primary risk for GM will be that the cash-economizing measures implemented as part of this program will compromise product offerings for years to come,” said Calyon Securities analyst Mark Warnsman. 

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The Federal Reserve left its key short-term interest rate unchanged Wednesday at 2%, marking the first time in the nine months that it did not cut rates.

The central bank also raised alarms about inflation. But experts said it is still unclear what the Fed will do with interest rates at its next meeting Aug. 5 and for the remainder of the year.

The widely expected move Wednesday comes at a time when many economists and consumers are focusing on the rising price of oil and other commodities. The central bank has a mandate to fight inflation, which it typically does by raising rates.

In fact, Dallas Federal Reserve Bank president Richard Fisher voted for a rate hike at the meeting. The other nine members of the Fed’s policy-making committee were in favor of no change to interest rates.

In a statement, the Fed said it still expects inflation pressures to ease later this year, but cautioned about the upward pressure on prices caused by rising oil and other commodity prices.

In light of continued increases in those prices, the Fed said "upside risks to inflation and inflation expectations have increased."

Some Fed watchers said the Fed had no choice but to talk tougher about inflation.

"The Fed is talking hawkish because it’s all they can do," said Rich Yamarone, director of economic research at Argus Research. "It can’t cut rates due to the rising inflation environment and it can’t raise rates due to the frailty of the economy and financial markets."

The central bank’s statement said that the rate cuts it has already made should help lead to improved economic growth ahead, although it cautioned the economy is still weak due to tight credit, a weak housing market and high energy prices.

The fed funds rate is an overnight bank lending rate used as a benchmark to set the rates that consumers pay for many types of loans as well as the prime rate used to peg the rates paid on certain business loans.

The central bank slashed its federal funds rate seven times since last September in an effort to keep the economy from weakening significantly in the wake of the housing slowdown and credit crisis rattling Wall Street and Main Street since last summer.

Despite Fisher’s push for an immediate rate hike, most economists are expecting the Fed to stay on hold until at least the end of the year, if not into 2009. And some economists say it’s possible the Fed’s next move might still be to cut rates further, not raise rates.

"I don’t think there’s anything preordained because I don’t believe they know what their next move will be," said David Kelly, economist and chief market strategist for JPMorgan Funds.

Kelly said he believes the most significant part of the statement is the Fed referring to high energy prices as a drag on the economy, as well as an inflation threat guaranteed payday loan. The Fed said that "the rise in energy prices are likely to weigh on economic growth over the next few quarters." It did not say that in April.

"They clearly see the double-edged sword. That makes them less likely to raise rates than if they saw oil as an inflation threat only," he said.

Another reason the Fed might not raise rates soon is because of the weak jobs market.

Mark Vitner, senior economist with Wachovia, said the Fed has limited ability to fight inflation pressures posed by oil and commodities such as corn and wheat since their prices are largely set by global supply and demand.

But unemployment has been on the rise and wages have not been keeping up with prices. Most economists say increases in personal income, not the price of commodities, are the biggest cause for concern regarding inflation.

"They can’t print oil, they can’t make it stop raining in the Midwest," said Vitner. "The part of inflation the Fed can actually control is performing fairly well. We don’t see any evidence of a wage-price spiral taking hold."

Lyle Gramley, a former Fed governor now with the Stanford Group, a Washington research firm, agrees that the uncertainty about growth and inflation risks make it difficult to predict what the Fed will do next.

"We just don’t know how things are going to work out," he said. "The essence of wisdom in this case is not to commit yourself to a course of action."

But other economists say the Fed is caught between hoping for inflation pressures to retreat and hoping for the economy to show some improvement, despite recent reports on consumer confidence, jobs and the housing market showing further weakness.

"The Fed seems to be focused on a strengthening economy. But assuming does not make it so," said Bob Brusca of FAO Economics. "Inflation risks will diminish only when you hike rates." 

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For some time Merrill Lynch CEO John Thain has been stressing the brokerage does not need to take more write-downs or raise more capital, but his confidence may have been misplaced.

Merrill Lynch & Co Inc (MER.N: Quote, Profile, Research, Stock Buzz) was rumored to be close to issuing a profit warning on Friday and a day after Citigroup warned of substantial second quarter write-downs.

The talk was taken seriously by investors, who pushed the shares down 4.6 percent on Friday on growing concern about the investment bank’s exposure to complex debt securities and derivatives known as collateralized debt obligations (CDOs).

The Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz) warning, which came in an investor conference call, had been based on similar concerns. If the fears with Merrill turn out to be justified, the bank may again have to raise capital, a move Thain said was not necessary as recently as last week.

But investors have heard that from Thain before payday loans in 1 hour. In April, he told the Nikkei newspaper Merrill had plenty of capital and did not need more. A few days later, he made similar comments during a trip to Japan. Two weeks later, Merrill raised $2.55 billion from selling preferred securities.

“If someone tells me that they don’t need to raise capital, that everything’s OK, I am not quite believing them,” said Jim Huguet, co-CEO of asset manager Great Companies.

Thain has also given an inconsistent message on whether Merrill would raise money through the sale of another big asset, its 20 percent stake in news and financial provider Bloomberg LP. In April, he said he had no plans to sell the stake, but earlier this month, he said he would consider such a move.

‘THE REAL CHALLENGE’ 

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No one knows when the credit crisis will end.

But when it does, U.S home prices may have lost a third of their value, high-yield bond valuations will hit levels close to those seen during the last recession, and what may amount to $1 trillion of Wall Street losses may translate into almost $4 trillion of lost access to capital.

That’s the view of top credit analysts, who say a U.S. housing decline, sparked last year by subprime mortgage debt defaults, will likely last another two years as a wider group of consumers, including prime borrowers, feel the pinch from a tightening of credit.

Peter Acciavatti, a credit analyst and managing director at JP Morgan Securities Inc, said in an interview that Wall Street write-downs and losses totaling at least $325 billion so far may ultimately mean $3.9 trillion in tighter credit conditions.

Moreover, home prices may fall as much as 30 percent from their peak in 2006 and not hit bottom until 2010, with greater drops still in subprime mortgage debt markets, he told Reuters.

“The housing correction is in a down phase,” Acciavatti said during a high-yield bond conference in New York free credit report.com. “We’re now going through a phase of deleveraging and the pulling out of easy money.”

Credit markets also will be under pressure from massive write-downs and losses stemming from consumer debt. The International Monetary Fund has estimated write-downs from global investment banks may approach $1 trillion, while J.P. Morgan forecasts the figure may climb as high as $600 billion.

A senior Fitch Ratings analyst forecast more defaults and delinquencies for U.S. home mortgages, and said the highest default rates are coming from recent mortgages originating in the last few years. 

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Insulin pumps are used by tens of thousands of teenagers worldwide with Type 1 diabetes, but they can be risky and have been linked to injuries and even deaths, a review by federal regulators finds.

Parents should be vigilant in watching their children’s use of the pumps, researchers from the Food and Drug Administration wrote. They didn’t advise against using the devices. But they called for more study to address safety concerns in teens and even younger children who use the popular pumps.

The federal review of use by young people over a decade found 13 deaths and more than 1,500 injuries connected with the pumps. At times, the devices malfunctioned, but other times, teens were careless or took risks, the study authors wrote.

Some teens didn’t know how to use the pumps correctly, dropped them or didn’t take good care of them. There were two possible suicide attempts by teens who gave themselves too much insulin, according to the analysis.

"The FDA takes pediatric deaths seriously," said the agency’s Dr. Judith Cope, lead author of the analysis. "Parental oversight and involvement are important. Certainly teenagers don’t always consider the consequences."

The pumps are popular because they allow young people to live more normal lives, giving themselves insulin discreetly in public and getting pizza with friends late at night. And they’re a growing segment of diabetes care, with $1.3 billion in annual sales worldwide, said Kelly Close, a San Francisco-based editor of a patient newsletter. She said 100,000 teenagers may be using them.

The pumps are used for those with Type 1 diabetes, which accounts for about 5 to 10% of all diabetes cases and used to be called "juvenile diabetes." The more common form is Type 2, which is often linked to obesity and more often affects adults.

Type 1 affects an estimated 12 million to 24 million people worldwide and occurs when the body attacks insulin-producing cells in the pancreas. Insulin regulates blood sugar levels, which when too high, can lead to heart disease, blindness and kidney damage.

Insulin pumps are the size of a cell phone and worn on a belt or pocket. They send insulin into the body through a plastic tube with a small tip that inserts under the skin and is taped in place. They cost about $6,000 and supplies run $250 a month. Most health insurers cover much of the cost.

Users must tell the device how much insulin to give before each meal, based on the estimated carbohydrates in the meal. The devices also deliver a continuous low level of insulin.

In the FDA study, appearing in the May issue of the journal Pediatrics, the reports of adverse events and deaths in adolescents using the pumps occurred from 1996-2005.

The FDA requires manufacturers to report injuries that could be linked to medical devices 500 fast cash. The authors analyzed reports from patients 12 to 21 years old. They emphasized that the reports aren’t always clear about the cause of death or injury.

The devices provide an alternative to multiple daily injections of insulin by syringe; some come with glucose monitors that reduce the number of times the finger must be pricked to test blood sugar.

While some teenagers want to switch from insulin injections to pump therapy to gain more flexibility in their lives, doctors said device problems such as a blocked tube can lead quickly to dangerous episodes of high blood sugar.

"In a matter of a few hours, all the insulin in the body disappears. Metabolically, the child starts to spiral out of control," said Dr. John Buse, the American Diabetes Association’s president for medicine and science. Kids need to be aware of the risk, monitor their blood sugar and be ready to give themselves an insulin injection.

Dr. Christina Luedke of Children’s Hospital Boston said she carefully screens teenagers and their families before prescribing a pump. She has refused it for some young patients.

"Without appropriate glucose monitoring, the pumps can increase the risk of getting sick more quickly compared to injections," Luedke said. However, she said, proper use makes life more bearable and can improve glucose control.

Teenagers also have problems keeping their diabetes under control with multiple daily insulin injections, doctors and manufacturers said.

"It is a constant struggle for a patient who is an adolescent to stay in control of any therapy," said Steve Sabicer, a spokesman for Minneapolis-based Medtronic Inc (MDT, Fortune 500)., which makes the top-selling insulin pump. The company stands behind the product’s safety and "the many years of clinical evidence that support the benefits of insulin pump therapy," he said.

Other companies with insulin pumps either on the market or in development include Abbott Laboratories (ABT, Fortune 500), Johnson & Johnson’s (JNJ, Fortune 500) Animas Corp., DexCom Inc. (DXCM) and Insulet Corp. (PODD) 

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