Madoff Fallout Pollutes Europe, Asia

The fallout from Bernard Madoff's alleged $50 billion Ponzi scheme just keeps getting worse. According to the Wall Street Journal, European banks, including Spain's Grupo Santander SA and France's BNP Paribas, are heavily exposed to the fraud, for roughly $3.5 billion. "Santander, the eurozone's largest bank by market value, said its clients had an exposure of €2.33 billion ($3.1 billion)," the newspaper writes. BNP Paribas is only slightly better off. It acknowledged on Sunday that "it could lose as much as €350 million as a result of the alleged fraud." According to Breakingviews, you can also add Italy's Unicredit, Dublin's Pioneer Investment, a handful of private Swiss banks, the London-based Man Group, and Japanese broker Nomura to the growing list of scalps from the Madoff scam.

Facing such staggering losses, the big question now is: How in the world did the Securities and Exchange Commission miss this one? To give the agency its due, it did open an investigation into Madoff 16 years ago to try to divine how he could pull off such consistent returns. The matter was later dropped, though, adding further criticism to an agency with lots of critics these days. "This is a debacle for the SEC," Joel Seligman, an SEC historian and president of the University of Rochester in New York, told the WSJ. "The commission has a lot to answer for."

Back to the bailout beat now, Chrysler and General Motors, it appears, will have to wait a few more hours, and possibly a few more days, before they learn definitively whether the White House will authorize a multibillion-dollar bridge loan. On Sunday, the White House said there would be no deal until President Bush returns from Iraq. According to the WSJ, it appears a matter of when, not if. "The administration is trying to determine how much money it will take to help the car companies, and is discussing a rescue totaling $10 billion to $40 billion or more," the newspaper writes.

Speaking of bailout recipients, loan giant Fannie Mae is feeling charitable these days. According to the New York Times, Fannie Mae announced on Sunday that it would renegotiate leases to allow renters to stay in foreclosed homes. "It will effectively transform Fannie Mae—a government-controlled mortgage finance company—into a national landlord," the newspaper writes.

How low will it go? That's what CNN Money asks ahead of the Federal Reserve's anticipated 10th interest rate cut on Tuesday. It writes, "Most economists believe the Fed will reduce the target on the fed funds rate by a half-percentage point to 0.5%. But there are some who think the Fed may go even further and drop the target to 0.25%." That move is likely to be viewed as risky business by Japanese investors who've flocked to the U.S. in recent years away from historic low rates at home. Now the "shrinking rate gap could drive Japanese investors from the U.S., leading to a further weakening of the dollar," writes the WSJ. "Once you get rates down to zero, it's hard to move off of zero. Japan learned that the hard way," Kurt Karl, chief U.S. economist with Swiss Re, told CNN Money, adding: "Plus, you've made the price of money free and it shouldn't be. There should be some cost to loans."

Remember the U.N.'s oil-for-food program, the tainted "help Iraq without helping Saddam Hussein" scheme that became a byword for corporate malfeasance? The Washington Post reports that German engineering giant Siemens has agreed to pay an $800 million fine to settle U.S. charges that it "knowingly used off-book accounts to conceal corrupt payments, mischaracterized bribes in corporate accounting and falsely described kickbacks paid to the Iraqi government." The Iraq stain is just part of a larger bribery scandal, "the largest in the company's 161-year history, [which] involved an estimated €1.3bn in suspected payments to officials around the world designed to win contracts," writes the Financial Times.

And if you think your portfolio has taken a beating this year, there may be some comfort in this last item. Prince Alwaleed bin Talal, the largest shareholder in Citigroup and the Arab world's wealthiest man, has lost $4 billion already this year, Bloomberg reports, citing Arabian Business. But don't feel too bad. He still has personal holdings of $17.2 billion, the publication writes.