End may be Near for Madoff-Victim Tremont - (www.nypost.com) Hedge-fund firm Tremont Group Holdings, which lost more than half of its assets to alleged scammer Bernard Madoff, is winding down operations and could shutter its doors by summer, sources tell The Post. The Rye, NY, fund, which is owned by life-insurance company MassMutual, has cut its staff by about 40 percent, The Post has learned, and people familiar with the situation said some remaining employees have been told they may be let go in June with severance packages. Tremont spokesman Montieth Illingworth declined to comment on the layoffs, but confirmed that the firm has closed its Rye Investment Management unit, which offered a line of single-manager funds, and which invested a whopping $3.1 billion with Madoff.
Elliott Hedge Fund Bought Fictitious Securities From Dreier - (www.bloomberg.com) Elliott Management Corp., the $12.8 billion hedge-fund firm founded by Paul Singer 32 years ago, told clients that it bought securities from Marc Dreier, the New York lawyer jailed for alleged fraud. Elliott lost money on promissory notes purchased in October from Dreier, who had previously done work for the company, it said in an undated quarterly letter to clients. The firm’s Elliott Associates LP fund declined 9.2 percent in the fourth quarter, its worst quarterly loss. “There are many reasons why funds lose money, but being defrauded is among the most embarrassing and annoying,” New York-based Elliott said in the letter, a copy of which was obtained by Bloomberg News. “We continue to adapt our processes to keep several steps ahead of fraudsters, and we maintain an attitude of probing skepticism. But sometimes we get hooked, as in the Dreier case.”
Fannie, Freddie may tap U.S. Treasury for $51 billion - (www.reuters.com) Fannie Mae and Freddie Mac could tap the government for up to $51 billion in coming weeks, exceeding some Wall Street estimates, so they can continue to operate as the largest providers of funding for U.S. residential mortgages. The storm of rising delinquencies and falling securities values that led to the government's seizure of the companies in September accelerated in the last quarter, requiring Fannie Mae and Freddie Mac to seek more of the stop-gap measures organized by the U.S. Treasury and their regulator. Analysts predicted more capital needs from Treasury through 2009. Fresh losses in the most recent quarter will probably be the harshest on Freddie Mac (FRE.P), which holds a larger portfolio of risky mortgage securities, including subprime bonds. The McLean, Virginia-based company said on Friday it may have to seek $30 billion to $35 billion in capital from the Treasury in the form of senior preferred stock.
GE Capital Leads Commercial Paper ‘Test’ as Fed’s Buying Ebbs - (www.bloomberg.com) Seventeen months after seizing up at the onset of the credit crisis, the $1.69 trillion commercial paper market may be the first to cut its reliance on federal bailout programs. About $245 billion of 90-day commercial paper that companies sold to the Federal Reserve starting in October will mature this week and next, central bank data show. As much as $50 billion to $70 billion of the debt may be rolled over and bought by investors, according to Barclays Capital in New York. The market’s ability to absorb the maturing debt may build confidence that U.S. companies are able to fund themselves without government support, said Deborah Cunningham, chief investment officer for taxable money markets at Federated Investors Inc. Investors, betting the commercial paper market has stabilized, pushed interest rates to record lows this month and bought the most 90-day debt since September, Fed data show. The debt rollover represents “a test of how well the market can sustain itself,” said Cunningham, who is buying commercial paper for Pittsburgh-based Federated, which oversees $288 billion in money-market assets. “And I think it will pass the test.”
Defaults stack up in the junk bond market - (www.latimes.com) The corporate junk bond market once again is living up to its name, as defaults continue to surge. A total of 15 companies worldwide have defaulted on their bonds this month, triple the total in January 2008, according to Standard & Poor's. The casualties this month include Lyondell Chemical Co., cable TV firm Charter Communications and mattress maker Simmons. All of the 15 were U.S. companies except one: Canadian telecom giant Nortel Networks. Junk bond values crumbled last fall, driving yields sky-high, as investors began to anticipate a sharp increase in defaults because of the sinking economy and the credit crunch.
Korean Financial Blogger Detained - (www.mikeabundo.com) We know political bloggers get harassed all the time, but this is the first I’ve heard of a financial blogger getting thrown in the can. Park Dae Sung, 31, an unemployed blogger now finds himself in hot water for allegedly being “Minerva,” a web guru who posted his thoughts on the state of the economy and the government’s economic policies. Those thoughts generated huge attention in Korea, particularly following Minerva’s prediction that Lehman Brothers would fail. Those musings, however, have not sat well with Seoul. Now Park has been taken into custody by the government and, according to his lawyer, faces a maximum five-year prison sentence for allegedly spreading false information with the intention of harming or threatening public interest. Park was arrested on Jan. 10 for a Dec. 29 posting in which he accused bureaucrats of ordering banks to stop buying dollars while the won was falling during last December’s global economic crisis. The official news agency Yonhap reported that Park was also arrested for a July 2008 posting that said the Finance Ministry had suspended all foreign currency exchanges. Park’s lawyer, Park Chan Jong, says prosecutors are alleging that the posting destabilized the foreign currency market to such an extent that an additional $2.2 billion injection was needed the next day to calm the market.
Condo developers in San Francisco hurting for buyers - (www.sfgate.com) Most developers unlucky enough to be marketing San Francisco condominiums today are scrambling for customers, dropping prices, boosting concessions or putting up "for rent" signs in an effort to fill their buildings. Condos in the city have outperformed the real estate market as a whole throughout the downturn, especially on the luxury end, but tight lending and relentless economic gloom have spread the pain across the region and price spectrum. -- The company behind Millennium Tower, the 60-story luxury project in SoMa set to open in April, will soon announce it is slicing all prices by 15 percent to entice buyers. In a surprising move, it's also extending that bargain to those who have already submitted deposits to purchase units. -- The owners of the Radiance, the 99-unit waterfront mid-rise in Mission Bay, expect to say next week that they will lower prices by an average of 10 percent on selected units. -- One Rincon Hill, the 64-story building that rises above the western approach to the Bay Bridge, isn't promoting any across-the-board cuts, but prices are down between 10 percent and 15 percent from a year ago, while spending on various incentives is up between 3 percent and 5 percent, said Paul Zeger, chief executive officer of Pacific Marketing Associates Inc., which markets that building.
Nikkei Surges on Rescue Plan - (www.nytimes.com)
U.S. Stock-Index Futures Rise; American Express, Citigroup Gain - (www.bloomberg.com)
Harvard, Dartmouth Losses May Increase on Buyouts, Real Estate - (www.bloomberg.com)
Global Financial Crisis Fells Iceland Government - (www.washingtonpost.com)
Bankers braced for bitter pill of regulation - (www.reuters.com)
German January Business Confidence Unexpectedly Rises - (www.bloomberg.com)
Layoffs Spread to More Sectors of the Economy - (www.nytimes.com)
Caterpillar, Sprint, Home Depot Slash Jobs on Falling Sales - (www.bloomberg.com)
For Fed Policy-Making, Murky Era Lies Ahead - (www.nytimes.com)
Layoffs Cut Deeper Into Economy - (www.washingtonpost.com)
Geithner Sworn in at Treasury; Dudley May Get Fed Job - (www.bloomberg.com)
Fannie to Tap U.S. for as Much as $16 Billion in Aid - (www.bloomberg.com)
Housing Prices Tumble at Record Pace - (www.bloomberg.com)
Flood of foreclosures: It's worse than you think - (money.cnn.com)
California jobless rates leaps to 9.3% - (www.sfgate.com)
Wealthy Sellers Happy to Break Even - (www.sfgate.com)
Peter Schiff: Let the Housing Market Crash - (www.usnews.com)
Mortgage Rates Soar - Fed Better Buy More - (mrmortgage.ml-implode.com)
Can Obama get us off our debt binge? - (optionarmageddon.ml-implode.com)
Who Needs Economists When We Have the Home Builders? - (www.financialsense.com)
Obama moves to force automakers to produce more fuel-efficient vehicles - (www.latimes.com)
Madoff Enablers Winked at Suspected Front-Running - (www.bloomberg.com)
F.D.R’s Example Offers Obama Cautionary Lessons - (www.nytimes.com)
Bank Stock Value Losses - (1.bp.blogspot.com)
Which banks profiting from bailout? Rep. Marcy Kaptur - (www.youtube.com)
Bankers have hijacked our savings and tax dollars - (jonnyob.blogspot.com)
California property tax revenue plummets with house values - (www.sfgate.com)
Sweden's Fix for Banks: Nationalize Them - (www.nytimes.com)
'Bad bank' could cost trillions - (www.washingtontimes.com)
Capitalism's Self-Inflicted Apocalypse - (www.commondreams.org) Excessive Mortgage Lending Causing Worldwide Economic Riots - (www.hubpages.com)
Saturday, January 31, 2009
Friday, January 30, 2009
Iceland's leaders say government could topple over economic crisis - (www.chicagotribune.com) Iceland's coalition government collapsed on Monday after an unprecedented wave of public dissent, plunging the island nation into political turmoil as it seeks to rebuild an economy shattered by the global financial crisis. Prime Minister Geir Haarde resigned and disbanded the government he's led since 2006. Haarde was unwilling to meet the demands of his coalition partner, the Social Democratic Alliance Party, which insisted on choosing a new prime minister in exchange for keeping the coalition intact. "I really regret that we could not continue with this coalition, I believe that that would have been the best result," Haarde told reporters. Iceland has been mired in crisis since October, when the country's banks collapsed under the weight of debts amassed during years of rapid expansion. Thousands of angry citizens have joined noisy protests against the government's handling of the economy, clattering pots and kitchen utensils in what some commentators called the "Saucepan Revolution."
Gloom deepens as 76,000 global jobs go - (www.ft.com) Corporate bellwethers in the US and Europe slashed more than 76,000 jobs from their payrolls to confront the deepening economic downturn, marking one of the most brutal days yet for workers on both sides of the Atlantic. US corporate groups such as Caterpillar, General Motors, Sprint Nextel. Texas Instruments, and Home Depot led the retreat, as the domestic recession coupled with tough export markets continued to take a heavy toll on their businesses. Pfizer, the drugs group, added to the tally saying jobs would be lost in its takeover of Wyeth. Large European companies such as Philips, the Dutch electronics company, financial group ING and the Anglo-Dutch steelmaker Corus, which is owned by India’s Tata Group, struck the same downbeat tone as they unveiled plans to axe staff.
· Sprint Nextel Cutting 8,000 Jobs to Fight Off Slump - (www.bloomberg.com)
· Home Depot to Cut 7,000 Jobs, Exit Expo Division - (www.bloomberg.com)
· Caterpillar to Cut 20,000 Jobs; 2009 Forecast Trails Estimates - (www.bloomberg.com)
· Philips focuses on cash as it axes 6,000 jobs - (www.ft.com)
· Corus cuts 2,500 UK jobs as demand drops - (www.ft.com)
71,400 jobs lost in one day - (money.cnn.com) The final week of January began with a bloodbath for the job market, as over 71,400 more cuts were announced on Monday alone. At least six companies from manufacturing and service industries announced cost-cutting initiatives that included slashing thousands of jobs. More than 200,000 job cuts have been announced so far this year, according to company reports. Nearly 2.6 million jobs were lost over 2008, the highest yearly job-loss total since 1945. "It's all about the consumer, and the consumer's been hit hard," said Robert Brusca, chief economist at Fact and Opinion Economics. "It's a vicious circle as weakness begets layoffs, which beget more spending weakness." Construction machinery manufacturer Caterpillar (CAT, Fortune 500) said Monday it will cut 20,000 jobs amid a "very challenging global business environment." The company had already planned to cut 15,000 workers since the fourth quarter of 2008, but added another 5,000, bringing the total to 20,000. Pfizer (PFE, Fortune 500) said in an earnings report it would cut 10% of its staff of 81,900 and close five of its manufacturing plants. And a second round of cuts will shed about 15% of employees from the combined Pfizer/Wyeth staff of 120,000. That makes a total of 26,000 jobs lost. The company already cut 4,700 jobs in 2008.
Citigroup to buy $50M private jet: report - (money.cnn.com) Citigroup Inc, which has received $45 billion of capital from the government, is going through with plans to buy a $50 million corporate jet, a person familiar with the matter said. The bank put in an order for the Dassault Falcon 7X two years ago and plans to accept delivery on the plane later this year, the source said. Canceling the deal would have forced the bank to pay a multimillion-dollar fee, the person said. Citigroup is selling two older Dassault jets, worth an estimated $27 million each, according to the New York Post, which was first to report that the bank was still buying the new plane.
US Arrests Financier in Purported $400 Million Scam - (www.cnbc.com) Authorities on Monday arrested the chief executive of a private New York financing firm on suspicion of running a purported Ponzi scheme that attracted $400 million in investments, U.S. law enforcement officials said. They said Nicholas Cosmo, head of Agape World on New York's Long Island, was said to provide commercial bridge loans, but was instead operating a traditional Ponzi scheme in which early investors are paid with the money of new clients. "Nicholas Cosmo took the advice of an attorney and complied with an arrest warrant," said Al Weissmann, spokesman for the U.S. Postal Inspection Service, which is investigating Agape World and Cosmo along with the FBI. Another law enforcement official, said agents had visited Cosmo's office on Monday expecting to arrest him, but he was not there. He complied with the warrant on Monday night. The amount of money, while large, pales compared with the alleged $50 billion fraud masterminded by investment manager Bernard Madoff. But law enforcement officials say they expect to uncover more Ponzi schemes following the sharp decline of the U.S. financial industry.
Bernanke Risks ‘Very Unstable’ Market as He Weighs Buying Bonds - (www.bloomberg.com) Federal Reserve Chairman Ben S. Bernanke and his colleagues may try once again to cure the aftermath of a bubble in one kind of asset by overheating the market for another. Fed policy makers meeting tomorrow and the day after are exploring the purchase of longer-dated Treasury securities in an effort to push up their price and bring down their yield. Behind the potential move: a desire to reduce long-term borrowing costs at a time when the Fed can’t lower short-term interest rates any further because they are effectively at zero. The risk is that central bankers will end up distorting the Treasury market, triggering wild swings in prices -- and long-term interest rates -- as investors react to what they say and do. “It sets forth a speculative dynamic that is very unstable,” says William Poole, former president of the Federal Reserve Bank of St. Louis and now a senior fellow at the Cato Institute in Washington. The Treasury market has “some bubble characteristics,” Bill Gross, the manager of Newport Beach, California-based Pacific Investment Management Co.’s $132 billion Total Return Fund, said in December on Bloomberg Television. He echoed that sentiment last week.
Nationalization Gets a New, Serious Look - (www.nytimes.com) Only five days into the Obama presidency, members of the new administration and Democratic leaders in Congress are already dancing around one of the most politically delicate questions about the financial bailout: Is the president prepared to nationalize a huge swath of the nation’s banking system? Skip to next paragraphPrivately, most members of the Obama economic team concede that the rapid deterioration of the country’s biggest banks, notably Bank of America and Citigroup, is bound to require far larger investments of taxpayer money, atop the more than $300 billion of taxpayer money already poured into those two financial institutions and hundreds of others. But if hundreds of billions of dollars of new investment is needed to shore up those banks, and perhaps their competitors, what do taxpayers get in return? And how do the risks escalate as government’s role expands from a few bailouts to control over a vast portion of the financial sector of the world’s largest economy?
American Express earnings plunge 79% - (money.cnn.com)
Nobel economist: How to rescue banks - (money.cnn.com)
Stimulus 101: What's in the bills - (money.cnn.com)
Your economy: Bad to worse - (money.cnn.com)
Microsoft and Yahoo: Deal or no deal? - (money.cnn.com)
Thain: Loss Not My Fault, BofA Knew Of Problems - (www.cnbc.com)
American Express Profit Tumbles, Misses Forecasts - (www.cnbc.com)
Texas Instruments Profit Falls; Will Cut 3,400 Positions - (www.cnbc.com)
Highest Rates in Generation Confront Everyone Without Fed Funds - (www.bloomberg.com)
House Prices Dropped in 70% of U.S. States in 2008, Report Says - (www.bloomberg.com)
Elliott Hedge Fund Bought Fictitious Securities From Dreier - (www.bloomberg.com)
China’s ‘Severe’ Challenges Create Budget Woes, Minister Says - (www.bloomberg.com)
Economic Crisis Fuels Unrest in E. Europe - (www.washingtonpost.com)
Pound Plunge May Push U.K.’s Brown Off Currency Fence - (www.bloomberg.com)
Barclays says not seeking capital after $11 billion hit - (www.reuters.com)
Warning over quantitative easing in eurozone - (www.ft.com)
Caterpillar, Sprint, Home Depot Slash Jobs on Falling Sales - (www.bloomberg.com)
U.S. Existing Home Sales Rise on Record Price Slump - (www.bloomberg.com)
Fed May Gain More Financial Oversight - (www.washingtonpost.com)
Tuition Hike Considered At Va., Md. Colleges - (www.washingtonpost.com)
Companies in U.S. to Slash More Jobs, Business Economists Say - (www.bloomberg.com)
With Rates Near Zero, What Will Fed Do Next? - (www.cnbc.com)
Property tax revenue plummets with home values - (www.sfgate.com)
American Express Profit Drops 72% as Missed Loan Payments Grow - (www.bloomberg.com)
Texas Instruments Posts Smallest Profit Since 2002, Cuts Jobs - (www.bloomberg.com)
Shadow of insolvency hangs over chipmakers - (business.timesonline.co.uk)
Smurfit-Stone, Cardboard Maker, Files for Bankruptcy - (www.bloomberg.com)
Toyota Japan output to drop 60 percent in April - (www.reuters.com)
Thursday, January 29, 2009
UK Charges Taxpayers for loan bailout so Buyers can buy more cars at low cost - (www.guardian.co.uk) Green payouts and 0% deals looked at in bid to tempt motorists to buy. Cheap car loans to encourage nervous motorists back into the showrooms could be unveiled this week under plans being drawn up by the government to rescue the stricken motor industry. Gordon Brown has privately signalled backing for extending some of the same support for lending now being offered to banks to car finance houses - often offshoots of the manufacturers - allowing 0% finance deals and other incentives to flow more readily to buyers. Ministers have also looked at introducing so-called "scrappage" schemes, under which motorists willing to trade in older, polluting cars for greener new models would get a one-off payment. Germany has proposed a similar payment worth almost £2,000 for its citizens, while Spain and France have backed similar measures. The business minister Lord Carter told peers last week that "we are considering [scrappage schemes] carefully".
Britain is facing return of three-day week – (www.independent.co.uk) Shorter hours would be preferable to mass unemployment, say government sources. The prospect of the three-day week returned to haunt Britain yesterday as it emerged that ministers are considering paying firms to cut hours in order to survive the recession. Tens of thousands of businesses are already planning to scale back working hours this year in an effort to stay afloat. But as the country comes to terms with the reality of a recession, it emerged that the Government is looking at compensating employees, through their firms – thereby drawing comparisons with the shutdowns of the 1970s. While the move would safeguard jobs, it would mean that the financial crisis is on a much larger scale, further undermining confidence in the economy with the suggestion of Britain grinding to a halt.
President Obama Gets An Economic Broadside – (www.safehaven.com) As Obama assumed the presidency an economic broadside was fired across his bow when the financial markets plunged to new lows. The banks remain in a parlous state and unemployment is still rising. Economist Nouriel Roubini said that if the banking system's losses hit $3.6 trillion -- as expected by quite a few financial observers -- then the "the US banking system is effectively insolvent because it starts with a capital of $1.4 trillion." What Mr Roubini overlooked is that a fractional reserve banking system is always insolvent. This was known from the very beginning of fractional reserve banking. The system rests on the belief that withdrawals will never reach a point where the banks cannot meet them. In other words withdrawals will always be a fraction of the banking system's reserves. In short, banks can never meet their liabilities in full. This is all well and good -- from the banker's position -- unless a financial crisis causes a run.
Roubini’s Gloom Gets Traction in Panicky Tokyo - (www.bloomberg.com) The champagne must be flowing at Toyota Motor Corp. headquarters. It just ended General Motors Corp.’s 77-year reign as the world’s largest automaker. Toyota also is looking ahead and going full circle in terms of management: It just named the grandson of the company’s founder as president. The celebrations and nostalgia will be short-lived, and not just because Toyota is forecasting its first operating loss in 71 years. It’s on the frontline of an economic plunge that might push Japan into another “Lost Decade.” That’s a strong statement, and one that’s worth exploring in Japan and beyond. Economic data coming out of Tokyo have been atrocious. Exports, for example, plummeted 35 percent in December from a year earlier. That was the sharpest decline since 1980 (there are no comparable data before then). Exports were the main driver of the recovery that now has died a very sudden death. With nothing self-reinforcing about Japan’s expansion, Asia’s biggest economy seemed to go from 120 kilometers (75 miles) per hour to zero in all of a week. Now it’s going in reverse, and picking up speed. Global demand for cars and electronics is drying up fast. Toyota, Sony Corp. and Honda Motor Co. are shedding thousands of workers and closing production lines as profits and sales dwindle. It’s just the beginning as the U.S. and Europe sink. Japan Blindsided: The global crisis blindsided most Japanese executives and politicians. Much of the chatter in 2008 was about how Japan’s cash-rich banks would play a white-knight role for a Wall Street in turmoil. Mitsubishi UFJ Financial Group Inc.’s $9 billion investment in Morgan Stanley was seen as the first of many such deals.
Renowned author John Robbins (of Baskin-Robbins fame and fortune) lost life savings in Madoff scheme – (www.mercurynews.com) Six weeks ago, renowned vegetarian author and Soquel resident John Robbins was painfully reminded of what he's always known to be true. Robbins, who walked away from the Baskin-Robbins fortune to seek a simple life grounded in sustainable food practices, lost his life savings in the $50 billion Ponzi scheme of which Wall Street financier Bernard Madoff is accused. "I know at this moment more than ever that our real wealth is in the love in our hearts, and the people we care about and who care about us, and in the quality of relationships to the spirit and natural worlds," Robbins, 61, said in an interview Thursday. Robbins, best-selling author of "Diet for a New America" and "The Food Revolution," said he and his wife of 42 years, Deo, lost 98 percent of their net worth in the vast investment sham that has sapped international banks, movie stars and charitable organizations. As a famous longtime resister of what he calls the "toxic mythology" that "self-worth is defined by net worth," Robbins acknowledged the irony of losing more than $1 million in a scheme fueled by old-fashioned greed.
Car parts sector looks for $10bn US bail-out - (www.ft.com) The automotive parts supply sector, laid low by the sharp drop in car production in the US, is to request at least $10bn of federal bail-out funds from the troubled asset relief programme. Industry representatives met Treasury officials and members of Barack Obama’s presidential team this month to discuss a growing financial squeeze in the sector. They plan to make a formal request for access to Tarp funds soon, according to Neil de Koker, president of the Original Equipment Suppliers Association, which represents companies that supply car and van makers. Separately, Larry Summers, head of the White House National Economic Council, said that the Obama administration would use the $350bn remaining of the $700bn that Congress provided to start tackling the financial crisis. His comments came after Nancy Pelosi, the Democratic speaker of the House, suggested that Congress might have to provide more money for Tarp. Speaking on ABC TV, she said she was “open to resolving the financial crisis”, explaining that there might be a need for “some increased investment” to shore up the banks. “If they come back, there’s going to have to be a justification, because people were very, very disappointed in how this money was dealt with at first.” Auto component makers claim that the collapse of the US auto parts industry would endanger not only hundreds of thousands of jobs in their own companies, but also threaten turnround plans at General Motors and Chrysler, which are receiving $17.4bn in federal aid.
Liquidation risk grows as finance dries up - (www.ft.com) US companies face a greater risk of liquidation because sources of finance to let them reorganise under the country’s bankruptcy code are drying up in the global financial crisis. In the US, companies on the verge of insolvency can restructure themselves under a Chapter 11 bankruptcy protection process, sometimes taking years. But the credit crunch has severely limited the availability of so-called ‘debtor in possession’ financing that is vital to give them this second chance. With previous big providers of DIP financing, such as GE Capital, shying away from the market, companies may have to rely on their existing lenders, says Standard & Poor’s, the rating agency. It said on Friday there had been no substantial increase in DIP volumes in 2008, in spite of a jump in the number of bankruptcies, highlighting the reluctance of banks and investors to finance companies in bankruptcy. Steven Smith, global head of leveraged finance and restructuring at UBS in New York, said this cycle was likely to see more liquidations than in the last three combined. He said: “The lack of DIP financing available is an issue for the American economy because of the potential job destruction that could result.”
Hard Times Cut Into Free Labor by Convicts - (online.wsj.com) Many states want to close prisons to save money, but town leaders fear how they'll cope without the free or ultra-cheap labor the inmates provide. One morning recently at the town hall here, Selectwoman Terri-Lynn Hall set out some fresh coffee, crackers and dip for the cleaning crew. "I also make 'em turkeys, bake 'em hams, and serve spaghetti," she said -- "with homemade sauce." One of the crew, Rex Call, put down his mop and helped himself to a piping hot mug of joe. "I'd rather be working here than sitting in the cell all day," said Mr. Call, who -- when he's not out on work-release -- is serving two years in state prison for car theft. Although many people fight fiercely to block prisons from coming to town, Charleston and other communities are feeling an opposite impulse these days. They are fighting to keep their prisons from going away. Many states, including Maine, Ohio, Washington and New York, want to close or consolidate prisons to save money. Here in Maine, Gov. John Baldacci wants to mothball part of Charleston Correctional Facility and relocate nearly 40% of the inmates, which would cut work-release crews. But this farming town of 1,500 wants its criminal element to stick around. Town leaders say they don't know what they will do without the free or ultra-cheap labor the jailbirds provide. "Oh my goodness, gracious, they are such an asset -- they are our public-works department," said Ms. Hall. Last year, Charleston's prisoners did 39,337 hours of community work, prison officials say, roughly the equivalent of 19 full-timers. Inmates maintain the five local cemeteries, set up election booths and hang Veteran's Day flags. They built the log-cabin "snack shack" at a local park, and helped bust up beaver dams in a stream that runs along Bacon Road.
Business Seeks Stimulus Tax Cuts - (online.wsj.com) Business groups are ramping up lobbying efforts to expand tax credits and incentives in Obama's $825 billion economic-stimulus bill.
Recession Batters Law Firms, Triggers Layoffs - (online.wsj.com) The recession has arrived for U.S. law firms, long seen to be insulated from economic downturns, with pay cuts and layoffs becoming commonplace.
Congress may make $7,500 home buyer tax credit more attractive – (www.latimes.com) Few consumers have tried to claim the credit because it had to be repaid over 15 years. But there's a...
Exporters try to halt Obama's trade barriers - (business.timesonline.co.uk) US companies are opposed to a federal initiative for fear that the policy will end in retaliation from foreign governments
Carmakers agree to keep aid within borders - (business.timesonline.co.uk) Ministers: City lost plot on bailout - (business.timesonline.co.uk) Government has been telling top businessmen that the City has 'missed' crucial details of last week's bank rescue package
Banking hole too deep to cover, says Rogoff - (business.timesonline.co.uk)
Minister attacks 'grossly over-rewarded' bankers - (business.timesonline.co.uk)
UBS bonus plan inflames rewards row - (business.timesonline.co.uk) The bank is expected to pay out more than £1 billion to staff next month after it was bailed out by Swiss government
UBS bailed out in Swiss government rescue - (business.timesonline.co.uk)
Moody's warns of credit downgrades - (business.timesonline.co.uk) Rating agency said that shortfall in final salary company pension schemes was at worst level for five years and could get worse
RBS to purge directors in big shake-up - (business.timesonline.co.uk) The clear-out comes as RBS is preparing to place £50 billion to £100 billion of loans into the government’s new bank-insurance scheme
RBS chief slams short-selling as shares slide - (business.timesonline.co.uk)
Nationalisation calls as RBS teeters on the brink - (business.timesonline.co.uk)
Madoff’s UK investors set to sue - (business.timesonline.co.uk) UK investors are planning legal action against banks over advice received before the Bernard Madoff investment scandal
Living on the hedge - (www.marketwatch.com) The plunge in commodity prices is causing havoc for first-quarter corporate earnings, as many companies are finding themselves on the wrong side of their hedges against grain and oil rises. Crude ends week up 9% Obama to let states restrict emissions - (www.marketwatch.com) Allianz reportedly to start its own retail bank - (www.marketwatch.com) Kellogg expands peanut butter recall - (www.marketwatch.com) China rebuts yuan criticism - (online.wsj.com)RBS said planning purge of directors - (www.marketwatch.com) Auto dealers dropping like flies - (online.wsj.com)
Time to Unravel the Knot of Credit-Default Swaps - (www.nytimes.com)
Obama Plans Fast Action to Tighten Financial Rules - (www.nytimes.com)
Warning of quantitive easing problems in eurozone - (www.ft.com)
IMF in discord over renminbi - (www.ft.com)
Obama aide says bail-out may not be enough - (www.ft.com)
Obama Details Recovery Plan - (www.washingtonpost.com)
Obama Signals Tough Restrictions on Banks in Rescue Package - (www.bloomberg.com)
Fed weighs options on credit markets support - (www.ft.com)
Barack's Bank Bet - (www.nypost.com)
Bad Times Spur a Flight to Jobs Viewed as Safe - (www.nytimes.com)
A Premium Sucker Punch - (www.washingtonpost.com)
Freddie Will Ask For More U.S. Funds - (www.washingtonpost.com)
Six Errors on the Path to the Financial Crisis - (www.nytimes.com)
Wednesday, January 28, 2009
Should We Bailout Geithner Too? - (www.newgeography.com) This morning the Senate Finance Committee approved the nomination for treasury secretary of Timothy F. Geithner, head of the Federal Reserve Bank of New York. Geithner is a Wall Street darling, but taxpayers may have a different take. Senator Jim Bunning (R-KY) reminded us at the Senate confirmation Hearing January 20 that Geithner was part of every bailout and every failed policy put forth by the current Treasury secretary. After you read this, you should begin to see why I’m so opposed to Geithner’s appointment – I don’t want the fox any closer to the hen house than he already is. For starters, look at what the Fed has admittedly been up to – this is from a recent speech by the President of the San Francisco Fed, Janet Yelin. The Federal Reserve Act authorizes the Fed to lend to “individuals, partnerships, or corporations” in extraordinary times. For the first time since the Great Depression, the Fed is invoking this authority to make direct loans to subprime borrowers – that is, those who can’t get credit from a bank. Basically, the New York Fed, under Geithner’s direction, created a couple of special companies so they could print money to get around restrictions on what the Fed can do directly. Now, be perfectly clear on this first point – this is not Treasury or TARP or Congress that’s spending this money. It’s the Federal Reserve. They don’t have to ask Congress for money, they just print it. The Fed is providing “credit to a broad range of private borrowers.” And by-and-large, they don’t have to tell you who they give the money to, either. Here’s how Yelin put it: “It is worth noting that, as the nation's central bank, the Fed can issue as much currency and bank reserves as required to finance these asset purchases and restore functioning to these markets. Indeed, the Federal Reserve's balance sheet has already ballooned from about $900 billion at the beginning of 2008 to more than $2.2 trillion currently—and is rising.”
Costs and Tighter Rules Thwart Refinancings - (www.nytimes.com) Major banks and mortgage brokers agree that the number of qualified borrowers has dropped significantly. By some brokers’ estimates, only 30 percent of applicants in certain markets are actually closing on their refinancing applications. In contrast, in the first half of last year, about 60 percent of applications were approved, according to the Mortgage Bankers Association. And only a select few borrowers with pristine credit can secure the most attractive rates: for the week that ended Jan. 15, rates on a 30-year fixed mortgage sank to 5.12 percent, the 11th consecutive weekly drop and the lowest rate since the big mortgage financer Freddie Mac began tracking them in 1971. In Arizona, California, Florida and Nevada, housing markets that are hardest hit, at least two insurers are now requiring borrowers to have at least 10 percent equity in their homes and a credit score of more than 720. About 48 percent of Americans have scores less than 699, according to Fair Isaac, the company that computes FICO credit scores. In other markets, the insurers are requiring a credit score of at least 680 — an indication of how the definition of a good credit score has changed as the economy has deteriorated. On top of that, Fannie Mae and Freddie Mac, the two big mortgage guarantors now under government control, have raised the fees they charge lenders on loans that they insure or buy. Those fees — in part the result of the two agencies’ losses in the housing market — are passed on to borrowers, with Fannie’s latest increase about to go into effect. As mortgage rates hit new lows every week, the number of homeowners seeking to refinance their homes has spiked to its highest level in five years. But many have been unable to win approval for their applications. And even some of the homeowners who do qualify have backed off, once they found out how difficult it was to get the advertised rate. So what should be a bright spot in an otherwise dismal economy — throngs of homeowners locking in low, fixed-rate mortgages that will free them up to spend elsewhere — threatens to become another example of how even the best government intentions do not always pan out. That was the case when the government, through its Troubled Asset Relief Program, started pumping money into banks with the goal of shoring up their balance sheets and spurring lending. And it appears to be happening again as the Federal Reserve buys up mortgage securities. The Fed is pushing down interest rates, but that has not been enough to bring the housing market back to life. While rates are falling, borrowers face higher costs every step of the way, from rising fees for mortgage insurance to added costs that drive up the mortgage rate. At the same time, lenders have become more cautious about whom they will lend to, as more people lose their jobs, watch their incomes decline and fall behind on their bills. One of the biggest stumbling blocks for many people is their plunging property values, which have erased all or most of the equity in their homes. Others cannot meet the increasingly stringent credit requirements, which either disqualify them or increase their costs. “Refinancing is a very difficult proposition right now,” said Mike Stoffer, president of Stoffer Mortgage in North Canton, Ohio. “The loss of equity and tighter credit standards are making it difficult for a lot of people to refinance.”
Freddie asks for another $35 billion - (www.ml-implode.com) In a filing with the SEC yesterday, Freddie laid out its second request for taxpayer funds: Based on preliminary unaudited information concerning [Q4] results…[Freddie Mac] management currently estimates that [its Conservator] will submit a request to…[Treasury] to draw an additional amount of approximately $30 billion to $35 billion under the $100 billion Senior Preferred Stock Purchase Agreement (Purchase Agreement) between Freddie Mac and Treasury. The Purchase Agreement requires Treasury, upon the request of the Conservator, to provide funds to the Company after any quarter in which the Company reports a negative net worth (that is, the Company’s total liabilities exceed its total assets, as reported in accordance with generally accepted accounting principles)… “Negative net worth” is an important formula to keep in mind because it’s the same one that demonstrates why the private banking system needs so much money. By virtue of its implicit government guarantee, Fannie and Freddie borrowed $4.5 trillion to create $4.5 trillion worth of loans. Assets = Liabilities + Equity. For Fan and Fred, Assets equaled Liabilities, so Equity was zero. With no equity in the equation, they had no cushion to protect against the declining value of their assets. By virtue of its implicit government guarantee, Fannie and Freddie borrowed $4.5 trillion to create $4.5 trillion worth of loans. Assets = Liabilities + Equity. For Fan and Fred, Assets equaled Liabilities, so Equity was zero. With no equity in the equation, they had no cushion to protect against the declining value of their assets
California-based 1st Centennial Bank fails - (www.marketwatch.com) 1st Centennial Bank of Redlands, Calif. was seized by the Federal Deposit Insurance Corp. and state regulators on Friday. It was the third bank failure this year, and brings to 28 the number of banks that have closed since the beginning of the current credit crisis.
Goldman Sachs stars lose their luster amid crisis - (www.reuters.com) NEW YORK (Reuters) - John Thain, Bank of America's just ousted head of investment banking, securities and wealth management, is only the latest alumnus from Wall Street powerhouse Goldman Sachs to fall abruptly from grace as the legendary bank loses its aura of invincibility. Thain -- the former chief operating officer at Merrill Lynch -- masterminded that bank's sale to Bank of America Corp (BAC.N). But he was forced to leave BofA under the shadow of a $15.31 billion fourth-quarter loss at Merrill, as well as allegations he was a lavish spender. Thain was among the many former executives from what once was Wall Street's most profitable investment bank who went on to other top companies, as well as the upper echelons of government. Once they were the brightest stars in the investment universe, but Goldman alumni -- including Thain, former Treasury Secretary Hank Paulson and former Citigroup Chairman Robert Rubin -- look much less brilliant now. "The Goldman feet of clay is the way I look at it," said Nancy Bush, an analyst at NAB Research, referring to the one-time "masters of the universe."
Grim UK data spark political spat - (www.ft.com) Britain’s economy contracted by 1.5 per cent in the last quarter of 2008, official data show, much more than economists had expected and the fastest decline in any quarter since spring 1980. It was the second consecutive quarter of shrinking output, bringing the decline over the past six months to 2.1 per cent. In the last recession in the early 1990s, the economy contracted by 2.5 per cent over five consecutive quarters. For 2008 growth was just 0.7 per cent, the weakest since 1992. The grim economic news prompted sharp political clashes over who was to blame for the downturn. Gordon Brown, prime minister, insisted the problem stemmed from a “global banking crisis” and “lax standards” of US regulation, as he claimed that “Britain can win through this difficult recession”. The opposition Conservatives said Mr Brown’s “endless announcements” were “commanding neither public confidence at home nor confidence abroad”. George Osborne, shadow chancellor, said: “It’s difficult to see how we’ll get that confidence with a prime minister who blames everyone else for the mess we’re in and refuses to acknowledge any mistakes.”
Six O.C. men charged in $52-million investment scam - (www.latimes.com) Six Orange County men face criminal fraud charges in an alleged $52-million investment scam that was said to promise big profits from luxury developments next to golf courses designed by Arnold Palmer, Jack Nicklaus and Greg Norman. The criminal cases, filed Thursday in Orange County Superior Court by the office of California Atty. Gen. Jerry Brown, follow civil charges brought by the Securities and Exchange Commission against the operators of Irvine-based Carolina Development Co. “This is a very serious case, an unusually large fraud," Brown said in an interview. The defendants "callously conned" more than 1,000 people, including retirees, he said. The SEC in 2007 won a $29.2-million judgment against Carolina's president, Lambert Vander Tuig, and a $2.1-million judgment against the vice president, Jonathan Carman. Vander Tuig, 50, of Rancho Santa Margarita, and Carman, 45, of Laguna Hills, were arrested Thursday along with two other defendants in the case. They were being held in Orange County jail with bail set at $52 million each for Vander Tuig and Carman. The four defendants appeared Friday in Superior Court in Santa Ana. They agreed to postpone their arraignments until Feb. 11 and will have lawyers appointed for them by the public defender, Brown's office said. No one could be reached for comment at the public defender's office.
Special zones urged for people who sleep in RVs, cars in Venice - (www.latimes.com) Tough economic times have spilled onto the streets of Venice, which has become a favorite place to park for scores of otherwise homeless people living in cars and campers. The practice has ignited a mini-uprising among residents living in the pricey coastal community. The number of cars and recreational vehicles has swelled so much over the last year that Councilman Bill Rosendahl, who represents the city's coastal areas, has proposed creating special zones away from neighborhoods where people can sleep in their vehicles. "The community has been going ballistic," Rosendahl said. "They can't park their own cars. Some of the folks who live in their cars and in campers defecate and urinate outside and create other issues of quality of life and health." His proposal, similar to programs in Santa Barbara and Eugene, Ore., would allow the cars and recreational vehicles to park in select "municipal properties, parking lots of churches or community-based organizations, industrial areas and other areas that would have minimal impact on residential communities." Current city laws prohibit sleeping in a car or RV on the street. "Let's stop kidding ourselves," Rosendahl said. "People are living in their cars. . . . So let's deal with the reality. In this economic downturn, it's even increasing."
Gold Tops $900 on Haven Demand as Equities Drop in Europe, Asia - (www.bloomberg.com)
U.S. Treasury 30-Year Bonds Post Biggest Weekly Loss Since 1987 - (www.bloomberg.com)
Crude Oil Rises on Speculation OPEC Cuts Will Reduce Supplies - (www.bloomberg.com)
Yen Rises to Record as Economic Concern Spurs Demand for Haven - (www.bloomberg.com)
Venture Capital Fell 33% Last Quarter to Lowest Level Since ’05 - (www.bloomberg.com)
More companies offer to reprice, exchange 'underwater' options - (www.latimes.com)
Once a Boon, Euro Now Burdens Some Nations - (www.nytimes.com)
Builder Confidence Edges Down Further In January - (www.nahb.org)
Good luck. It's going to be a tough couple of years - (www.nashuatelegraph.com)
What Really Lies Behind the Financial Crisis? - (knowledge.wharton.upenn.edu)
Funding the Bailouts by Printing Money and Issuing Debt - (www.savingtoinvest.com)
China Rebuts Geithner, Denies Currency Manipulation - (www.bloomberg.com)
House prices in sharp turn down - (money.cnn.com)
California's median house price falls 38 percent - (news.yahoo.com)
Jobless claims surge and housing starts tumble - (finance.yahoo.com)
Deflation 101 slide deck - (msurkan.podbean.com)
Is this another Great Depression? - (msnbc.msn.com)
Obama Signals Tough Restrictions on Banks in Rescue Package - (www.bloomberg.com)
Obama to Decide Soon Whether to Add to Bailout - (www.washingtonpost.com)
Freddie Will Ask For More U.S. Funds - (www.washingtonpost.com)
SF Bay Area apartment rents fall - (www.sfgate.com)
Apartment Rents, Occupancies Drop in U.S. as Job Losses Mount - (www.bloomberg.com)
Finally, Renters Have Some Pull - (online.wsj.com)
Bright Spot in the Housing Crash: Cheaper Rents - (www.time.com)
Banks no longer hide foreclosed properties - (www.dailybusinessreview.com)
Housing Starts, Permits in U.S. Slump to Record Low - (www.bloomberg.com)
John Thain's $87,000 Rug - (www.thedailybeast.com)