US could be heading for recession

Former US Treasury Secretary Larry Summers warned that the United States may be heading into recession as the biggest victim to date of the sub-prime mortgage debacle was humiliatingly sold for a token sum in Germany.
Traders are braced for another week of turmoil after the near breakdown of America's $2,200bn (£1,100bn) market for commercial paper.
"It would be far too premature to judge this crisis over," Mr Summers said. "I would say the risks of recession are now greater than they've been any time since the period in the aftermath of 9/11."
In Germany, it emerged that the state-bank SachsenLB may have accumulated $80bn of exposure to risky assets through a set of Irish funds kept off balance sheet.
The regional government of Saxony agreed yesterday to sell the East German bank - the biggest victim so far of the worldwide credit rout - for a token €300m (£204m) to the Landesbank Baden-Württemberg in Stuttgart (LBBW), ending a three-week saga that has revealed the extent of German involvement in the some of the most treacherous areas of US sub-prime debt.
Georg Milbrandt, prime minister of Saxony, said the sale of state-owned lender was the only viable option.
"Given the market turbulence and the pressures on the bank, it could not have gone on without a partner. We want to get our ship off the high waves and into a safe port," he said.
Sachsen LB, founded in 1992 after the fall of the Berlin Wall, was rescued two weeks ago in a state orchestrated bail-out. A consortium of banks agreed to provide a €17.3bn credit lifeline, but only on the understanding that it agreed to be sold to a stronger player.
It allegedly used no fewer than five Irish 'conduits' (off-balance sheet vehicles) to invest in collateralised debt obligations (CDOs) and other high-risk instruments, according to German newspaper Süddeutsche Zeitung.

Read the full article at the Telegraph.