Released on: July 10, 2008, 11:37 pm

Press Release Author: Fiona Davis

Industry: Financial

Press Release Summary: Cornerstone Worldwide on the real reason the Fed can't hike


Press Release Body: Rumours abound that Cornesrstone Worldwide has revealed the real
reason behind the Federal Reserve's rather inert interest rate statement on
Wednesday in a note to clients.

Investors are, by now, familiar with the sharp drop in equity prices on world
bourses and it is these falls that are believed to form the basis of Cornerstone
Worldwide's reasoning.

According to sources close to Cornerstone Worldwide, the US Treasury Secretary, Hank
Paulson and several Wall Street luminaries spent a considerable portion of the
tail-end of last year convincing several sovereign wealth funds to provide funds to
enable the likes of Citigroup and Merrill Lynch to rebuild their capital ratios
after they were savaged by a slew of writedowns in the aftermath of the subprime
debacle. Since making these multi-billion dollar investments in what they were
undoubtedly assured were rock solid institutions, it appears that the US investment
banking community have been unable to stem the tide of writedowns as the US housing
crisis marches on. Citigroup's share price has plummeted as have those of Merrill
Lynch, Lehman Brothers and Morgan Stanley.

Had chairman Bernanke raised interest rates on Wednesday, rest assured the Dow Jones
Industrial Average would have dropped considerably further than the 11500 touched
yesterday. More to the point Cornerstone Worldwide's note reportedly suggests that
Mr Paulson and his Wall Street cohorts would have had a lot of explaining to do -
especially if they harboured any hopes of tapping their new Asian and Middle Eastern
benefactors for more cash now that all those claims that the credit crunch was over
have turned out to be somewhat wildly optimistic.



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