KeNo's Housing and Economic Portal: Monday September 5 Housing and Economic stories

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TOP STORIES:

Wall Street Aristocracy Got $1.2 Trillion in Fed’s Secret Loans - (www.bloomberg.com) Citigroup Inc. (C) and Bank of America Corp. (BAC) were the reigning champions of finance in 2006 as home prices peaked, leading the 10 biggest U.S. banks and brokerage firms to their best year ever with $104 billion of profits. By 2008, the housing market’s collapse forced those companies to take more than six times as much, $669 billion, in emergency loans from the U.S. Federal Reserve. The loans dwarfed the $160 billion in public bailouts the top 10 got from the U.S. Treasury, yet until now the full amounts have remained secret. Fed Chairman Ben S. Bernanke’s unprecedented effort to keep the economy from plunging into depression included lending banks and other companies as much as $1.2 trillion of public money, about the same amount U.S. homeowners currently owe on 6.5 million delinquent and foreclosed mortgages. The largest borrower, Morgan Stanley (MS), got as much as $107.3 billion, while Citigroup took $99.5 billion and Bank of America $91.4 billion, according to a Bloomberg News compilation of data obtained through Freedom of Information Act requests, months of litigation and an act of Congress. “These are all whopping numbers,” said Robert Litan, a former Justice Department official who in the 1990s served on a commission probing the causes of the savings and loan crisis. “You’re talking about the aristocracy of American finance going down the tubes without the federal money.”

Greeks act to avert bank failure - (www.ft.com) Greece’s four largest banks agreed to take up a €50m convertible bond to help recapitalise Proton Bank, a small lender, the central bank announced this weekend, in what is being seen as an attempt to avert a run on the country’s fragile banking system. The deal came ahead of an expected announcement this week that several Athens lenders plan to seek emergency liquidity assistance from the Greek central bank, senior bankers said. Greek banks no longer have sufficient high-quality collateral to seek funding from the European Central Bank after recent sovereign downgrades. But they are eligible for liquidity allocated by the Bank of Greece in agreement with the Frankfurt-based ECB and are expected to seek it this week.

Global Markets Move, but Merkel Won't - (online.wsj.com) Never say that euro-zone countries can't agree on anything. A consensus is rapidly forming: Germany should transfer to its euroland partners more of its hard-earned money, either by lending its impeccable credit to an issue of euro bonds, or contributing more to a much-enlarged European Financial Stability Facility. This weekend, Belgium's finance minister, Didier Reynders, added his voice to the crowd demanding access to Germany's wealth. No surprise there: Belgium ranks third, right behind Greece and Italy, in the size of its debt relative to the size of its economy. True, it has a way to go before its almost 100% debt: GDP ratio catches up to Greece's (about 150%) and Italy's (about 120%), but its 10-year bonds now yield approximately twice the premium over German bunds that investors extract from France, and Moody's Analytics steadily upgrades the probability of a Belgium default. I perhaps should mention that the emerging consensus concerning Germany's role as euro zone Lady Bountiful does not include the lady herself: Chancellor Angela Merkel is having none of it.

Commerzbank CEO calls for EU finance minister: report - (www.reuters.com) A European finance minister with sway over member states' taxes and budgets is needed to lead the euro zone out of its debt crisis, says the Chief Executive of Germany's second-largest lender, Commerzbank. "We need a real European finance minister, who is endowed with the appropriate powers," CEO Martin Blessing said in an op-ed to be published in Sunday paper Welt am Sonntag, which was in parts made available to the media on Saturday. "With the introduction of a fiscal union, Brussels should have the right to take budgetary powers from countries that do not stick to the rules. It should have the right to levy its own taxes and to set up a common debt agency to issue bonds," said Blessing, whose bank is 25 percent owned by the German government. The CEO said the bundle of measures proposed by French President Nicolas Sarkozy and German Chancellor Angela Merkel this week was not enough.

Layoffs sweep Wall Street, along with low morale - (www.reuters.com) In early summer, before layoffs began sweeping across Wall Street, billboard-sized photos of employees were plastered on the walls, pillars and elevator banks of Credit Suisse Group AG's offices in the United States and abroad. The museum-quality prints, depicting workers from administrative assistants to senior executives, were emblazoned with motivational words like "Proactive" and "Partner." By mid-July, however, the photos disappeared and the Swiss banking giant began laying off 2,000 employees. Security guards prevented employees from taking cell-phone pictures as the posters were stripped away, according to one employee who was present. "It sent an entirely wrong message," said an employee, who was not authorized to speak publicly. "Management literally threw away that kind of money on something so trivial, while planning to cut thousands of jobs." A bank spokeswoman declined to comment on the internal campaign or the employee's comments.