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Singapore will "spiral downwards" if it has a weak government, former Minister Mentor Lee Kuan Yew warned recently. Mr Lee, who was Prime Minister from 1959 to 1990, noted that many Singaporeans now desire a 'First World Parliament' and a two-party political system. He made these comments in a recent interview with China Central Television that aired on 6 July. The full transcript was obtained by The Straits Times (ST) on Tuesday. He was quoted as saying, "Their argument is simple. A First World country must have a First World Parliament. A First World Parliament must have a First World opposition. Then you can change dice. I think if ever we go down that road, I'll be very sorry for Singapore." The Workers' Party had campaigned for a First World Parliament during this year's General Election. It won six seats in Parliament, the highest number to be held by an opposition party since Independence. Mr Lee was among those who stepped down from the Cabinet after the GE. On his legacy for the ruling People's Action Party (PAP), Mr Lee said, "I took this country from a very low base in the Third World and in 20 to 40 years gradually transformed it into a First World country, and now it's gone on to a different leadership and new problems crop up because people believe that what has been achieved is always secure. I don't believe that is so." "I believe once you have weak, ineffective government, the whole progress you have made will spiral downwards. But the majority of people believe it is secure for them, so now they have ideas about the West, two-party system." He advised the Chinese government to ignore the US' and Europe's criticism of China's system of government, just as he had done when Singapore's governing system was attacked. The US and Europe believe that "out of contention you get progress", so parties take turns to rule, depending on who temporarily had the upper hand, he was reported as saying. "If I were the Chinese, I would ignore (their criticisms) and carry on with what I have been doing and make progress, maintain peace and stability and discipline and improve the lives of my people." He noted, "I just let the critics say what they like. I do what I know I have to do and I have every day proved to them their criticism does not carry weight, that I am still here, the system is still working and the people are thriving. That's the answer to them." Mr Lee cited similarities between the PAP and Chinese Communist Party, such as cultural backgrounds and working on the basis of pragmatism not dogmatism. But he also pointed out that while China may be interested in how the Singapore government keeps the city clean and has housing for all its citizens, Singapore is much smaller and more vulnerable to outside forces compared to China. http://sg.news.yahoo.com/blogs/singaporesc...-041349460.html

We are just beginning to feel the heat of this meltdown. I doubt any bailout will have much of an effect, unless US is prepared to see its currency go to US1=SG$1 as they continue to print money or raise interest rates in a very difficult enviroment. They are experiencing what we have suffered in 1997 times 100, as their investment banks are highly leveraged 30x or more and they are dealing with a credit default swap market of 60 TRILLION! . Asian could export their way out of their financial crises to Euro & USA, but where can USA export to when even Europe is dire straits? China? Well maybe can export milk . What was the catalyst for this? The gung ho US consumer who spents more money than he makes buying big houses, consumer products and big cars fueled by easy credit. They have forgotten how to save $. They fuel their purchases by 2nd or 3rd mortgages on their property or using creditcard/loans etc. Sounds familiar huh? The 700 billion bailout represents just 5% of the outstanding mortgages of 14 Trillion in USA. I think their housing prices drop by an average of 20% already. 5% boost can stem systemic risk for not very long I suspect, but gives the rich shareholders a chance to escape with their pants on leaving the middle Americans to foot the bill for many years to come. . Things will get worst and worst as this crises unravels and other risk eg credit cards, car loans etc come to light. So the Ben & Paul would subscribe to more alcohol to sober up a drinking binged hangover. How typical. Credit Traders Sowing Seeds of Destruction Prompt SEC Crackdown By Shannon D. Harrington, Caroline Salas and Pierre Paulden Sept. 24 (Bloomberg) -- The $62 trillion market for credit- default swaps, created to protect banks from loan losses, helped fuel a near-meltdown in the financial system and now may be regulated for the first time. The derivatives precipitated plunges in the shares and debt of Wall Street firms, accelerating the collapse of Lehman Brothers Holdings Inc. and the U.S. takeover of American International Group Inc., the biggest U.S. insurer. Now, regulators want to bring oversight to a part of the credit market that may be more susceptible to manipulation than selling stocks short, according to U.S. Securities and Exchange Commission Chairman Christopher Cox. Banks ``are suffering the consequences of their own actions,'' said Thomas Priore, chief executive officer of Institutional Credit Partners, LLC, a New York-based hedge fund with $13 billion in assets. ``They created a mechanism through default swaps to reflect a view on credit that has taken on a life of its own.'' The swaps became one-way bets on the demise of financial institutions as traders hedged the risk that their partners might implode, said Gary Kelly, a strategist at broker Tradition Asiel Securities Inc. in New York. The wagers sent distorted signals about credit risk, he said. The resulting run on shares of financial companies prompted Cox yesterday to seek enforcement powers over the market. New York State will also start regulating some sales of the derivatives, according to Governor David Paterson. Loan Protection ``The absence of regulatory oversight is the principal cause of the Wall Street meltdown we are currently witnessing,'' Paterson said in a statement Sept. 22. Banks started buying and selling credit derivatives in the mid-1990s to protect loan portfolios, Andy Brindle, the former head of JPMorgan Chase & Co.'s credit-derivatives group, said in 2003. The International Swaps and Derivatives Association started reporting credit-derivative volumes in 2001, when volume stood at $919 billion. The contracts trade in over-the-counter deals, leaving each side exposed to the risk their partner will default. There's no exchange or clearinghouse for the swaps and no system for publicly reporting trades. Credit-default swaps aren't issued or repaid by the companies referred to in contracts. The instruments pay the holder the face value of the amount protected in exchange for the underlying securities if a borrower fails to adhere to debt agreements. Death Spiral The market helped set off a death spiral this month for Lehman and AIG as a jump in the cost of protecting debt, or credit spreads, pushed down their shares. That eroded capital and prompted credit-rating companies to threaten downgrades. Bear Stearns Cos. met a similar fate in March before JPMorgan took the bank over in a rescue orchestrated by the Federal Reserve and Treasury. Credit spreads were exaggerated as banks and investors hedging the risk of their trading partners defaulting rushed to buy swaps. That sent the price of protection soaring. ``The risk concerns became massively overblown,'' said Tradition's Kelly, who for the past three years made recommendations on stocks based on signals from credit-default swaps. ``Now, the time that the equity market starts heavily focusing on the CDS market, it's probably a period where its reliability is the most questionable.'' The difference between the cost at which dealers sell and buy protection on Merrill Lynch & Co., AIG, Morgan Stanley, Goldman Sachs Group Inc. and Wachovia Corp. widened last week to an average of about 63 basis points, compared with 10 basis points the previous week, according to quotes from London-based CMA Datavision. A basis point is equivalent to 0.01 percentage point. `Nonsense' Trades Trading in the derivatives became ``nonsense,'' Morgan Stanley Chief Financial Officer Colm Kelleher, 51, told investors after reporting third-quarter earnings Sept. 16. The New York-based securities firm had net income of $1.43 billion in the quarter and reported $175 billion of cash and available equivalents, up from an average of $135 billion the prior quarter. Credit swaps showed a higher risk of default for the broker than homebuilder Lennar Corp., which reported losses in each of the last six quarters. Credit-default sellers on Sept. 17 demanded as much as $2.1 million upfront and $513,000 a year to protect $10 million in Morgan Stanley bonds from default for five years. The price implied a 65 percent chance the company would go bust within five years, based on a valuation model created by JPMorgan. The cost has since dropped to $500,000 a year, implying it has a more than one-in-three chance of failing. `No Rational Basis' The price moves had ``no rational basis,'' and helped touch off a 66 percent slump in his firm's stock last week, said CEO John Mack, 63. ``Why should CDS spreads be having such a big impact on the stocks?'' Glenn Schorr, a UBS AG analyst in New York, wrote in a Sept. 17 report. ``Isn't this a bit disconcerting that the illiquid CDS market, or the rating agencies, can have so much influence on the fate of these companies and alter the landscape of the brokerage industry?'' Merrill Lynch, seeking to prevent itself from being the market's next target, agreed to be bought by Bank of America Corp. last week after credit-default swaps implied a one-in-three chance of default in five years and the shares plunged 31 percent in four days. Morgan Stanley and Goldman Sachs, the last of the five big U.S. investment banks, sought approval to become bank holding companies, allowing them to build deposit bases and move away from a business model that investors had deemed too dependent on borrowed money, or leverage. `Default Risks' Credit swap traders shouldn't be blamed for pushing Lehman into its grave, according to Tim Backshall, chief strategist at Credit Derivatives Research LLC in Walnut Creek, California. ``A company that relies on short-term funding and high leverage is destined to face higher default risks,'' he said. Lehman spokesman Mark Lane in New York didn't return calls for comment. Credit-swap buyers and sellers don't need to own bonds or other debt of the company referred to in a contract. This leads to ``outsized incentives'' for investors to bet on an issuer defaulting, Cox said in Congressional testimony yesterday. ``We are looking at the effects of short-selling'' of shares, he said. ``Greater opportunities for manipulation exist in the CDS market.'' `Ill-Fitting' Regulation Short sellers borrow shares and attempt to profit by repurchasing the securities later at a lower price and returning them to the holder. ``Proposals which would seek to treat privately negotiated contracts as securities, or otherwise apply ill-fitting regulatory regimes to these agreements, are likely to deter healthy economic activity,'' Robert Pickel, ISDA's CEO, said in a statement yesterday. Banks face pressure from regulators to create a clearinghouse by the end of the year that would back trades between dealers and absorb the failure of a market-maker. New York State also plans to treat some credit-default swaps as insurance policies after AIG sold protection on more than $400 billion of debt that led to $18 billion of losses in three quarters. Collateral Demand The surge in AIG's credit spreads and slump in the shares prompted Moody's Investors Service and Standard & Poor's to cut the insurer's ratings on Sept. 15. That allowed counterparties to demand more than $13 billion in collateral on swap trades and forced the company to cede control to the government in exchange for an $85 billion loan. ``A major part of AIG's problems were created when credit- default swaps were issued by a non-insurance unit that did not hold sufficient reserves,'' the statement from Paterson's office said. Goldman Sachs, which reported $4.9 billion of writedowns and credit losses the past year, saw credit-default swaps widen to a record 685 basis points on Sept. 17 from 148 at the end of August, suggesting a 45 percent chance of default in five years. Goldman shares fell to as low as $85.88 on Sept. 18 in New York Stock Exchange composite trading, and closed yesterday at $125.05, down 42 percent this year. Spokesman Michael Duvally declined to comment. Taking Cues Stock investors began taking cues from the derivatives in 2005, when the contracts moved before leveraged buyouts and other transactions were announced, said Tradition's Kelly. When a surge in Bear Stearns's credit swaps preceded its collapse, investors began looking to the market for early signs of stress in other financial companies. ``It's become suddenly a huge focus of the market,'' Tradition's Kelly said. ``Credit issues have really begun to start driving the equity market.'' Frank Glaser, 75, a retired Hughes Aircraft executive in Los Angeles dumped Wachovia preferred shares he bought in December after asking his broker at UBS where credit-default swaps on the Charlotte, North Carolina, based-company were trading. The derivatives implied a 47 percent chance of default in five years on Sept. 17, the day Glaser sold the shares at a loss, based on the JPMorgan valuation model. Wachovia is managing through the pressure in the credit markets and is financially sound, spokeswoman Christy Phillips- Brown said. The shares fell to as low as $8.50 last week and closed at $14.75 yesterday. ``We don't trust the rating agencies,'' Glaser said last week. ``Lehman was A2 the day before it went bust, so what have I got to go on? I listen to the president of Wachovia. He sounded like he really knew what he was doing, and I'm reasonably sure he's going to come out of it. But the market doesn't believe him because the credit-default swaps are huge

Business Times - 20 Jun 2008 LETTERS TO THE EDITOR HDB contibuting to price spiral I REFER to the article 'HDB pricing policy limits impact of rising costs' (BT, June 11). As a 60-year-old Singaporean, I empathise with the growing despair of young couples when it comes to such a basic aspiration as home ownership. Private property is mostly beyond their reach. Even for HDB flats, they are caught between waiting as long as six years for new flats or paying exorbitant prices for resale flats. In the 1970s, a graduate's starting pay was around $1,000 per month. Then, in HDB Marine Parade Estate, prices of 3-room, 4-room and 5-room new flats were $17,000, $20,000 and $35,000 respectively. By 1990, the average price of 5-room new flats was $70,000. Such prices then reflected a 'cost-based' pricing approach. Now, graduate starting pay is three times higher than in the 1970s, but prices of new similar HDB flats have gone up 10-30 times. These massive price hikes are largely due to the HDB switching over to a 'market-based' pricing approach, following the 1994 property bull run. In 2007, the HDB finally confirmed that 'the prices of new HDB flats are based on the market prices of resale HDB flats, and not their costs of construction'. In 2000, the total break-even cost for a 5-room new flat was an estimated $120,000. But, under the market- based pricing approach, the HDB first looks at the prevailing market price of, say, $260,000 of a 5-room resale flat. It will then pick a slightly lower figure of, say, $200,000 as the selling price for the 5-room new flat (despite its $120,000 break-even cost). HDB will then say the new flat buyer is getting a so-called 'market subsidy' of $60,000, arising from the difference between the resale flat market price and new flat selling price. There is thus no actual 'cash subsidy' given at all. This market-based pricing approach had resulted in new flat prices and resale flat prices chasing each other in an upward spiral, affecting buyers of both new and resale flats. It has also led to current prices of 4-room new flats varying so much from $200,000 (Sengkang) to $400,000 (Telok Blangah) and a whopping $590,000 (Boon Keng). HDB is supposed to be a low-cost public housing developer. Why then is it not passing on to flat buyers the economy-of-scale cost savings in its huge developments by pricing its new flats on a cost-based break-even basis? See Leong Kit Singapore I am expecting some standard HDB reply on this soon!